In the late 1990s, the United States experienced a significant productivity shock that increased the marginal product capital. This caused:

Question

Quizplus · Accepted Answer

An increase in the marginal product of capital leads to a rightward shift of the IS curve, as firms increase investment spending to take advantage of the higher productivity. This leads to an increase in output and a decrease in the interest rate, as shown by the new intersection of the IS and LM curves. This shift in investment spending also leads to a potential long-run increase in the aggregate supply curve.

In the Late 1990s, the United States Experienced a Significant