Consider the impact of an increase in labor-enhancing technology within the classical model. Provide graphs to illustrate what happens to real wages, labor, output, and the price level
What will be an ideal response?
An increase in labor-enhancing technology will shift the production function upwards, which will increase labor demand and increase the real wage. This will increase the aggregate supply curve, which increases output and reduces the price level.
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Figure 7-1
Of the graphs in Figure 7-1, which best represents marginal physical product?
A. 1 B. 2 C. 3 D. 4
Before an uneven rise in prices Allan consumed 5 bread and 6 juice. After the price increase and with an increased welfare payment from the government Allan consumes 4 bread and 7 juice. Does the government payment represent a true cost-of-living adjustment (COLA)?
A) Yes, if the two consumption bundles lie on the same indifference curve. B) Yes, if the second bundle yields more utility than the first. C) No, the first bundle is clearly preferred. D) Not enough information.
The law of increasing opportunity cost says that
a. wages increase as employment increases b. interest rates rise as inflation increases c. the cost of increasing employment opportunities increases with specialization d. the more of something we produce, the less expensive it becomes e. the more of something we produce, the greater is the opportunity cost of producing an additional unit
Which of the following Fed actions would both decrease the money supply?
a. buy bonds and raise the reserve requirement b. buy bonds and lower the reserve requirement c. sell bonds and raise the reserve requirement d. sell bonds and lower the reserve requirement