According to an article on barrons.com, “Investment firms are starting to use AI [artificial intelligence] to execute trades [of stocks, bonds, and other financial securities], manage portfolios [of financial securities], and provide personalized service to their clients.” The article notes that other financial firms, including banks and insurance companies, are using AI to decrease the costs and increase the accuracy of compliance with government regulations and “to free employees to work on more valuable jobs.” 

a. How does the use of AI affect labor productivity in the financial system? Briefly explain. 

b. How would the financial system’s use of AI affect the rate of long-run economic growth? Briefly explain using the loanable funds model.