1. Draw the labor market equilibrium diagram and the saving-investment diagram. a. Consider an increase in future expected total factor productivity. Draw the changes that this type of shock implies for the graphs, and state implications for changes in employment, wages, consumption, investment, interest rate, and output. (Assume for simplicity that current labor supply does not respond to changes in the rate of interest.) b. Total factor productivity shocks tend to be positively correlated over time. Consider the case of an increase in both current and expected future total factor productivity. Repeat part a. (Again, assume that current labor supply does not respond to changes in the rate of interest.)
1. Draw the labor market equilibrium diagram and the saving-investment diagram. a. Consider an increase in future expected total factor productivity. Draw the changes that this type of shock implies for the graphs, and state implications for changes in employment, wages, consumption, investment, interest rate, and output. (Assume for simplicity that current labor supply does not respond to changes in the rate of interest.) b. Total factor productivity shocks tend to be positively correlated over time. Consider the case of an increase in both current and expected future total factor productivity. Repeat part a. (Again, assume that current labor supply does not respond to changes in the rate of interest.)
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter21: Unemployment
Section: Chapter Questions
Problem 41CTQ: Unemployment rates have been higher in many European countries in recent decades than in the United...
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