Question
Assume that the economy can be accurately described by a perfectly competitive Real Business Cycle model with no frictions and the usual generic production function
Assume that the economy can be accurately described by a perfectly competitive Real Business Cycle model with no frictions and the usual generic production function that exhibits constant returns to scale. create a graph and write short written summaries that explain the graphs, explain the effects of an increase in productivity. In particular, explain how:
a) this will affect labor supply and labor demand, and the equilibrium level of employment
b) this will affect aggregate supply, aggregate demand, and equilibrium output
c) this will affect the real interest rate
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