A draw the new production function in the same graph i

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Unformatted text preview: the real wage. b) A decrease in the real wage. c) A favorable supply shock such as a fall in the price of oil. d) An adverse supply shock such as a reduced supply of raw materials. 2) A tremendous flood along the Mississippi River destroys thousands of factories, reducing the nation’s capital stock by 5%. What happens to current employment and the real wage rate if labor supply is positively related to the real wage? a) Both employment and the real wage rate would increase. b) Both employment and the real wage rate would decrease. c) Employment would increase and the real wage rate would decrease. d) Employment would decrease and the real wage rate would increase. 3) Assume that the economy is in equilibrium with a fixed capital stock and labor force. If technological progress...
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This note was uploaded on 02/25/2014 for the course ECON 100B taught by Professor Wood during the Spring '08 term at University of California, Berkeley.

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