PDE ECU33011_202223_assignment_1 X + X C File | C:/Users/Mrinalsareen/Desktop/ECU33011_202223_assignment_1_RBC%20(3).pdf . . 4 of 4 Q 2 Explain how and why the economy responds to a produc- tivity shock over the following 100 periods (equivalent to O 25 years). + Assume the economy starts in steady state (kj = 0 and do = 0) and is hit by a one time productivity shock of 1% (EA,1 = 0.01, EA,j = 0 for all j # 1). Explain why the capital stock, output, etc respond the way they do. This involves first using eqn. 1 to get the value of productivity in each period and then using this, eqn. 2 and the initial capital stock to get capital in each subsequent period. Finally, now that you have productivity and capital in every period you can use eqn. 2 to get the other variables in every period. Then you just have to plot them and explain the behaviour. The spreadsheet from the third tutorial can be used for this. You will need to change the parameters to reflect the new parameter choices, and then enter the correct shocks in the impulse response tab. The spreadsheet charts will show you the response of the model economy to the shock and you just have to use the model to explain the behaviour of the variables. Your explanation should relate the behaviour of the economy to the equilibrium conditions rather than to equation 2. In other words, if high productivity leads to higher output, this should be explained through the behaviour of the factors of production and the production function Yt = At K. LI- rather than through yt = 0.0929kt + 1.2574at 1 12.C a ENG 19:03 Cloudy O IN 30-10-2022 20