In the New Keynesian model, an increase in current total factor productivity

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In the New Keynesian model, an increase in current total factor productivity would shift the output supply curve to the right, which means that firms can produce more output at any given price level. This leads to an increase in real output and a decrease in the price level. With the output supply curve shifting to the right, it opens a positive output gap as the economy is producing more than the potential output.

In the New Keynesian Model, an Increase in Current Total