In the late 1970s, the United States experienced a productivity slowdown that decreased the marginal product capital. This caused:

Question

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The productivity slowdown decreased the marginal product of capital, which leads to a leftward shift of the IS curve. This is because a decrease in the marginal product of capital decreases the expected profitability of investing in capital, causing investment to fall and decreasing aggregate demand. This shift in the IS curve leads to a decrease in output and an increase in the equilibrium interest rate.

In the Late 1970s, the United States Experienced a Productivity