Explain how an increase in the public's taste towards less leisure would affect the labor market, the production function, and aggregate output. Provide graphs to illustrate
What will be an ideal response?
An decrease in the demand for leisure would shift the labor supply curve to the right (up), which would decrease the real wage and increase the quantity of labor. This increase in the quantity of labor would lead to a movement along the production function towards higher output.
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Other things equal, a decrease in the cost of capital would be associated with an upward shift of the investment function and, hence, with a rise in aggregate expenditures
a. True b. False Indicate whether the statement is true or false
As the Fed increased the volume of loans to financial institutions in response to the 2008 financial crisis, this resulted in
a. a vast increase in the monetary base and the excess reserves of the commercial banking system. b. a substantial increase in short term interest rates. c. a sharp decrease in the monetary base and a contraction in the excess reserves of the commercial banking system. d. an increase in the volume of loans extended by commercial banks and a sharp increase in the inflation rate.