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The foreign and domestic economies are initially at potential GDP. The domestic economy is small and the foreign economy is large. The exchange rate is
The foreign and domestic economies are initially at potential GDP. The domestic economy is small and the foreign economy is large. The exchange rate is floating and capital is perfectly mobile. Adjustment to shocks happens instantly. Using the AD-AS model analyze the long run impact on domestic X-M, I, C, Y, P and E for the following shock:
Labor productivity in the domestic economy grows significantly
please explain what happened to AD AS curve and X-M, I, C, Y, P and E
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