Question

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Suppose Congress announces a new government program designed to enhance current productivity by providing job training to workers negatively impacted by international trade. Using the real intertermporal model,

A)what is the impact on output supply?

B) what is the impact on output demand?

C) what is the impact to labor supply?

D) what is the impact to labor demand?

Answer 1

A)It is obivious that the output supply will increase. There will be a shift in the supply curve as  the costs of production decreases. A higher level of productivity will shift the Short Run Average Cost curve to the right because with improved productivity, firms can produce a greater quantity of output at every price level.

B) A change in the productivity of a will increase the demand for it (an increase in productivity increases demand) because the product will cost less, hence will be more demanded.

C) This will increase supply of labor as it will incentivize the workers to do work.

D)This will decrease the labor demanded as it will allow more output to be produced with the same level of employment. But in other way it will also increase it because it will decrease the cost of labor to firms and promote the creation of new industries.