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Econ 100B Section 5 Answers

C a positive supply shock causes i the production

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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...
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