In a two-good,two-period model with trade,an increase in current domestic total factor productivity

Question

Quizplus · Accepted Answer

When current domestic total factor productivity increases, it leads to an increase in domestic output. This increased output may not be entirely absorbed by domestic demand, and thus there may be an increase in exports, leading to an increase in the current account surplus. Therefore, an increase in current domestic total factor productivity would increase domestic output and increase the current account surplus.

In a Two-Good,two-Period Model with Trade,an Increase in Current Domestic