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you found is the full-employment level. ) Suppose that there is a one percentage point negative shock to total factor productivity and then, separately, a

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you found is the full-employment level. ) Suppose that there is a one percentage point negative shock to total factor productivity and then, separately, a one-percentage point negative shock to the capital stock. You can assume that these shocks are temporary and accordingly the supply of labour remains constant Calculate the effect of each shock separately on the cyclical unemployment rate, 11 - , and the output gap, 10H%(In(Y) 9 In('}')), where QInQ is the natural logarithm. Which shock has the largest effect and why? e)

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