Question

Suppose we are at time t∗ and we learn that the technology will increase permanently from A to A′ starting by next period (t∗ + 1). What happens in labor, capital, financial and money market in long run (at time t∗)? Assume a closed market economy.

Answer 1

The long term effects of impending technological progress on labour markets can be both ways. The improvement in technology created new products and thus creation of more labour jobs . On the other hand , the greater automation can also make the labour lose their livelihood. Now, to see which effect would be greater, it depends on the kind of technology and state policies.

The effect on financial and money market is the increase in GDP and increase per capita income and improve the standard of living. This increases free flow income for consumption thus improving money markets