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Unformatted text preview: number was later revised to a loss (CNN 2008). Gerard Jackson has a theory as to why a recession changes the unemployment rate so much. The failure to understand the forces that result in succeeding recessions being accompanied by higher levels of unemployment is due to the acceptance of two economic fallacies: treating money as neutral and capital as homogeneous. If money is neutral, that will only change real output and the price level. Hence, changes in money supply will only misdirect production. It also follows that if capital is consistent (meaning that all capital goods are perfect substitutes for each other) bottlenecks cannot occur and capital cannot be lost through malinvestents. Source: gerardjackson .com...
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- Spring '05