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Macroeconomics

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Moderate

Classical Model: Increase in Productivity

MACRO-WQVDGG

Ignoring Say's Law which posits that aggregate demand increases with aggregate supply due to an income effect, which of the following will occur if productivity rises under the classical model?

A

Prices and output will rise.

B

Prices and output will fall

C

Prices will rise and output will fall

D

Prices will fall and output will rise