Fiscal and monetary policy measures are mainly implemented to manage short-term economic fluctuations, called business cycles. In addition, the policymakers are also interestedin bolstering the country's economic long-term productive capacity, which contributes towards stronger prosperity and wellbeing. A nation's prosperity is strongly aligned to the productivity of its labor.

a). What are the main factors or ingredients that determine the productivity of the economy? Which of these factors pose limitations to growth?

b). How to illustrate the impact of innovation or technological breakthrough in the economy by using the business cycle model and AD-AS model?