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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

If firms become more optimistic about the future of the economy and, at the same time, innovation in 3-D printing makes most workers more productive, what is the combined effect on output, employment, and the price-level?

To determine

Impact on output, employment and price level due to increase in investment is to be determined.

Explanation

As the firms are positive about the future prospects of economy, they will invest more in economy to increase their output. With increase in investment, there will be rightward shift of AD curve.

More productivity means more output. Due to innovation in 3-D painting, it is technological up gradation of existing resources, which means same amount of labor will produce large amount of output. Thus, aggregate supply curve will shift to the right.

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