In the New Keynesian model, an increase in current total factor productivity shifts the
A)output demand curve to the left.
B)production function to the right.
C)production function up.
D)output demand curve to the right.
E)output demand curve and production function to the left.

Question

Quizplus · Accepted Answer

An increase in current total factor productivity makes it possible to produce more output from the same inputs, effectively raising the production function. This is represented graphically by shifting the production function upward.

In the New Keynesian Model, an Increase in Current Total