Answer to Question #63610 in Macroeconomics for Alina

Question

Which options are correct?

Assume perfect capital mobility, fixed nominal exchange rate and adaptive expectations. How does a one-time increase in productivity affect the economy?

Select one or more:
a. It lowers the domestic price level permanently.
b. It moves the LAS curve to the right but the AS curve does not change.
c. It moves both the LAS ans AS curves to the right but the AS curve changes its position over time.
d. It lowers the domestic price level but only temporarily

Answer 1

e. It lowers the domestic price level but only temporarily.