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Say there is an economy without investment. Using the classical model, what is the effect of a temporary increase in productivity on Output, Consumption, and

  1. Say there is an economy without investment. Using the classical model, what is the effect of a temporary increase in productivity on Output, Consumption, and Price level?
  2. What is the effect of a temporary increase in productivity in the Keynesian model, with sticky prices? Is your answer different to part 1? If so, explain why. Make sure that you discuss the short, the medium, and the long run.

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