C a positive supply shock causes i the production

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: n the labor force participation rate iii. In equilibrium, labor demand equals labor supply, and: 1. the real cost of labor (real wage), w, equals the marginal product of labor 2. labor demanded equals labor supplied IV. Full- Employment Output a. Full- employment, or potential, output is the level of output when the labor market is in long- run equilibrium. It is also the economy’s long- run aggregate supply, LRAS. YP = AF(K; ) b. Factors that change full- employment output: Rotation of the production function. i. Shifts in the demand for labor and/or supply of labor. 2 SPRING 2014 ECONOMICS 100B V. GSI: KRISTYN ABHOLD Supply Shocks a. Supply (or productivity) shocks occur if there is a change in the amount of output that can be produced with...
View Full Document

Ask a homework question - tutors are online