Figure 17-1

-In the Friedman "Fooling Model" if P(e)is less than P then the labor supply curve in Figure 17-1 above
A)shifts leftward when workers realize their error.
B)always shifts rightward.
C)initially remains the same.
D)Both A and C are correct.

Question

Figure 17-1
 
-In the Friedman "Fooling Model" if P(e)is less than P then the labor supply curve in Figure 17-1 above
A)shifts leftward when workers realize their error. 
B)always shifts rightward. 
C)initially remains the same. 
D)Both A and C are correct.

Quizplus · Accepted Answer

According to the Friedman "Fooling Model," if P(e) is less than P, workers will initially believe that their real wage has increased and supply more labor. However, once they realize their error, the labor supply curve will shift leftward. Therefore, both options A and C are correct.

Figure 17-1 -In the Friedman "Fooling Model" If P(e)is Less Than P