Long Run Aggregate Supply Research Paper

Assignment 13

Answer No. 2

a) The long-run aggregate supply will increase/shift to the right as the labor force will increase due to a wave of immigration.

b) The long-run aggregate supply will decrease/shift to the left as the natural rate of unemployment rises due to the increase in minimum wage.

c) The long-run aggregate supply will increase as with the new invention of a more powerful computer chip. This will increase the productivity will also increase the inputs and the outputs.

d) The long-run aggregate supply will decrease/decline as with the severe hurricane would damage the factories along the East Coast.

Answer No. 5 a) This statement is false as the aggregate demand curve slopes vertically. This is because a fall in level of price raises the overall quantity of goods and services. This is demanded through the exchange rate, wealth, and the interest rate

c) This statement is false because if firms adjusted their prices rapidly and if sticky prices were the only possible cause for the increase in the slope of the short run aggregate supply curve, then the curve would be vertical. d) This statement is false because an economy could enter a recession if the aggregate demand curve or the short run aggregate supply curve shifts to the left.

Answer No. 7 a) The price levels would increase if the chairman were to use the monetary policy. The inflation would likely happen since the economy is in long run equilibrium. b) The nominal wage would increase if the employees would expect to maintain the standard of living that they have. c) This change would decrease the profitability of producing the goods and services. d) This change would shift the short run aggregate supply curve to the left. Buxani