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In: Economics
5. The slope and position of the long-run aggregate supply curve
Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which of the following? Check all that apply. The inflation rate The quantity of physical capital The size of the labor force The price level
Suppose the economy produces real GDP of $60 billion when unemployment is at its natural rate.
Use the purple points [diamond symbol] to plot the economy's long-run aggregate supply [LRAS] curve on the graph.
Suppose the government passes a law that significantly increases the minimum wage, The policy will cause rate of unemployment to rise/fall, which will:
Shift the long-run aggregate supply curve to the left fall
Shift the long-run aggregate supply curve to the right
Not affect the long-run aggregate supply curve
In the following table, determine how each event affects the position of the long-run aggregate supply [LRAS] curve.
Direction of LRAS Curve Shift
The government allows more Immigration of working-age adults who find work.
For environmental and safety reasons, the government requires that the country's nuclear power plants be permanently shut down.
A natural disaster destroys a significant amount of the economy's production facilities.
Q1] options 1, 4
In long run, changes in money supply only affects nominal variables, no effect on real Variables
So prices & inflation rate is affected
.
Graph
LRAS is Vertical at Y = 60
.
1] rise in Minimum wages will cause Unemployment rate to rise
MCQ: option 1]
LRAS shifts to left
Table
Scenario | effect |
Allows more immigration | right |
Nuclear plants shut down | left |
Natural disaster destroys | left |
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Suppose the economy produces real GDP of $70 billion when unemployment is at its natural rate.Use the purple points [diamond symbol] to plot the economy's long-run aggregate supply [LRAS] curveon the graph.
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Suppose the government passes a law that reduces unemployment benefits in a way that causesunemployed workers to seek out new jobs more quickly. The policy will cause the natural rate ofunemployment tofall, which will:Points:1 / 1Close Explanation
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In the following table, determine how each event affects the position of the long-run aggregate supply[LRAS] curve.
Direction of LRASCurve ShiftThe government allows more immigration of working-age adultswho find work.RightA scientific breakthrough significantly increases food productionper acre of farmland.RightA government-sponsored training program increases the skill levelof the workforce.RightPoints:1 / 1Close Explanation
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