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Explain why there is a belief that technology shocks are highly persistent. What happens if the...

Explain why there is a belief that technology shocks are highly persistent. What happens if the shocks are not highly persistent?

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Technology shocks are changes in technology that bring about changes in socio, economic or political outcomes. In economic theory, a technological shock is one which brings about a change in the production function. A technology shock changes the business cycle dynamics which makes them highly persistent as they bring about a change in the output. If technological shocks were not persistent, then individuals would not be encouraged to innovate as the gains from technology are not spread over a significant period of time. Since the possibility of a ttechnological positive shock is spread over a long time, entrepreneurs are encouraged to innovate and bring new technological process.

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