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 that the economy was initially at equilibrium. Suppose that a war breaks out in the neighboring country which results in an increase of foreign workers into the domestic economy. What type of shock has occurred in the U.S. economy? A) A positive labor demand shock B) A negative labor demand shock C) A positive labor supply shock D) A negative labor supply shock
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