Price misperception during a positive technology shock would cause:
A)output or GDP to rise by less than it would without price misperception.
B)labour supply to rise by less than it would without price misperception.
C)the expected price level to fall less than the actual price level falls.
D)all of the above.

Question

Quizplus · Accepted Answer

During a positive technology shock, if workers misperceive the price changes and think that the real wage has increased more than it actually has, they might supply more labor, leading to an increase in output/GDP. However, if they underestimate the increase in their real wages due to price misperceptions (believing prices have not fallen as much as they have), they might not supply as much labor as they would if they had perfect information, leading to less increase in labor supply and output than otherwise. Additionally, price misperception can lead to incorrect expectations about the price level, affecting economic decisions. Thus, all the effects listed are plausible outcomes of price misperception during a positive technology shock.

Price Misperception During a Positive Technology Shock Would Cause