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∗)?

Answer 1

At time t* one learns that technology will increase permanently from A to A' from next period (t* + 1 )

Demand for skilled labor would increase versus lower demand for menial tasks as technology is able to cover and do that function.

Capital increases with the firms as labour costs reduce, this increases investment and saving in the economy over the long run.

Reliance on financial and money market as a means to save becomes all important as more and more people are able to access the markets remotely and perform all the functions seemlessly.