A positive real shock causes a shift of the

Name: A positive real shock causes a shift of the
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Question

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A positive real shock such as an increase in technology or productivity will shift the production function upward, which will lead to an increase in potential output. As a result, the Solow growth curve, which relates potential output to capital and labor inputs, will shift to the right. This will lead to increases in both output and the return on capital, which will encourage investment and economic growth.

A Positive Real Shock Causes a Shift of the