Question: Assume that a Cobb-Douglas production function is a good representation of the economy, the substitution effect is stronger than the income effect, and that the

 Assume that a Cobb-Douglas production function is a good representation of

the economy, the substitution effect is stronger than the income effect, and

Assume that a Cobb-Douglas production function is a good representation of the economy, the substitution effect is stronger than the income effect, and that the economy was initially at equilibrium. Suppose that Congress passes a law that guarantees all adults an annual income of $80,000 whether they work or not. What type of shock has occurred in the U.S. economy? A positive labor demand shock A positive labor supply shock A negative labor supply shock A negative labor demand shock

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