In the 1990s, the unemployment rates in the U.S. were higher than that in the European nations

In the above figure, if the budget line shifts from RT to RS, the income effect is illustrated by the move from

A) a to b. B) a to c. C) b to c. D) T to S.

According to the real business cycle theory, the supply side shock from dramatic increases in oil prices in the 1970s led to higher unemployment because

A) when the real wage, W/P, fell, workers chose leisure. B) when the real wage, W/P, rose, workers chose leisure. C) workers increase Pe. D) None of the above.