Macroeconomics

4. Consider a permanent rise in Total Factor Prodictivity in an economy. (A permanent rise in TFP is a rise in both current and future values of TFP.) a. Determine the impacts of this exogenous shock on current employment, output, investment, interest rates and wages using diagrams. (Hint: Analyze using graphs separately the impacts of a rise in z and z', then comment on the combined effects of these two changes) b. How would your results change if the rise in TFP were temporary rather than permanent