In the 1960s and 1970s, research funding by the U.S. government and some universities led to revolutionary advances in network computing

These advances in communication and network technology remained largely isolated to governmental and academic use. By the mid-to-late 1990s, the Internet began to be widely adopted with massive increases in productivity (which journalists dubbed the "new economy"). Which of the following is an appropriate description of the mechanism behind this supply shock? A) Since this "new economy" was a new paradigm, the transition from a pre-internet to an internet economy was initially costly. Thus, the AS curve likely shifted to the left and unemployment likely increased in the short-run.
B) The ensuing increase in productive capacity led to the rightward shift of the LRAS which is a likely explanation for the protracted decline in the unemployment rate of the 1990s.
C) A negative output gap would have resulted in the short-run, but it was eventually closed by a rightward shift of the LRAS which is a likely explanation for the protracted decline in the inflation rate of the 1990s.
D) all of the above
E) none of the above


B

Economics

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