Using the real business cycle theory, explain the effects of an adverse technological shock on the labor market and on the output market. Illustrate graphically how the adverse technology shock affects labor demand and supply
Why is this theory controversial?
The real business cycle theory emphasizes that changes in technology will usually change the level of full employment and output. An adverse technological shock would cause output and potential output to fall and would cause a decrease in the demand for labor. Critics of the theory find it difficult to explain how many of the post-World War II recessions can be explained by adverse technological shocks. Critics also point to the fact that the theory does not provide an explanation for unemployment, because in the real business cycle model, the labor market is in equilibrium: the quantity of labor demanded equals the quantity of labor supplied, and everyone who seeks employment finds employment.
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The interest rate on Baa corporate bonds is ________, on average, than interest rates on Treasuries, and the spread between these rates became ________ in the 1970s
A) lower; smaller B) lower; larger C) higher; smaller D) higher; larger
According to the graph shown, if this were a perfectly competitive market, the outcome in the short run would be:
This graph shows the cost and revenue curves faced by a monopoly.
A. Q1, P1.
B. Q1, P3.
C. Q2, P2.
D. The graph is of a monopoly, and therefore there is no way to determine a perfectly competitive outcome.
Keynesians and supply-siders both agree that the government can take steps to reduce both the unemployment rate and the inflation rate
Indicate whether the statement is true or false
Virtual Currency Unit 3 (VCU3) poses a __________ risk to nations in which is it used because ___________________________
a. Low; it can be spent only in virtual worlds. b. Low; when converted into legal tender, it has no effect on a nation's M2 money supply or monetary base. c. Low; it does not have the potential to raise a nation's price level or threaten the nation's payment system. d. All of the above are true.