2. The slope and position of the long-run aggregate supply curveWhich of the following factors will influence the position of the long-run aggregate supply curve? Check all that apply.O The amount of available natural resourcesO The price levelO The inflation rateO The quantity of physical capitalSuppose the economy produces real GDP of $70 billion when unemployment is at its natural rate. On the following graph, use the purple line (diamondsymbol) to plot the economy's long-run aggregate supply (LRAS) curve.132128LRAS1241201161121081041005060REAL GDP (Billions of dollars)102030407080PRICE LEVEL Suppose the government passes a law that reduces unemployment benefits in a way that causes unemployed workers to seek out new jobs morequickly. The policy will cause the natural rate of unemployment towhich will:O Shift the long-run aggregate supply curve to the rightO Not affect the long-run aggregate supply curveO Shift the long-run aggregate supply curve to the leftIn the following table, determine how each event affects the position of the long-run aggregate supply (LRAS) curve.Direction of LRAS Curve ShiftEventLeftRightNo ShiftThe government allows more immigration of working-age adults.A scientific breakthrough significantly increases food production per hectare of farmland.A government-sponsored training program increases the skill level of the workforce.

Factors that will increase economy's potential to produce, will shift the long run aggregate supply…

2. The slope and position of the long-run aggregate supply curve Which of the following factors will influence the position of the long-run aggregate supply curve? Check all that apply. The amount of available natural resources The price level The inflation rate The quantity of physical capital Suppose the economy produces real GDP of $70 billion when unemployment is at its natural rate. On the following graph, use the purple line (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve. 132 128 LRAS 124 120 118 112 108 104 100 10 20 30 40 50 60 70 80 REAL GDP (Billions of dollars) PRICE LEVEL

2. The slope and position of the long-run aggregate supply curve Which of the following factors will influence the position of the long-run aggregate supply curve? Check all that apply. The amount of available natural resources The price level The inflation rate The quantity of physical capital Suppose the economy produces real GDP of $70 billion when unemployment is at its natural rate. On the following graph, use the purple line (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve. 132 128 LRAS 124 120 118 112 108 104 100 10 20 30 40 50 60 70 80 REAL GDP (Billions of dollars) PRICE LEVEL

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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7. The long-run aggregate supply curve and short-run adjustments Suppose an economy's short-run aggregate supply curve (SRAS), current equilibrium aggregate price level (P₁), and real GDP (Q1) are shown on the graph that follows. The economy currently has Natural Real GDP (QN) of $6 trillion. Use this information to place the orange long-run aggregate supply curve (LRAS, square symbols) in the correct position on the graph. 20 PRICE LEVEL 0 2 4 6 Q₁ REAL GDP (Trillions of dollars) 8 SRAS 10 LRAS
12. Assume that an economy operates according to the sticky-wage model. The nominal wage was set to make labor supply and labor demand equal when the expected price level equaled 120 (as measured by the consumer price index). a. Use a graph of the labor market to illustrate what happens to the quantity of labor employed if the actual price level over the time period when wages are stuck equals 110. b. Use a graph of the production function to illustrate how the quantity of output produced changes if the actual price level equals 110 when the expected price level is 120. c. Given the unexpectedly low price level, will this economy be operating above, below, or at the natural rate?
1) What effects might each of the following have on aggregate demand/aggregate supply? In each case use a diagram to illustrate the effect, explain why shifts occurred, and state the impact of each event on the price levels, the unemployment rate, and real GDP. a. Congress passes into law a $1.5 billion cut in personal income taxes. b. Significant technological advances in the renewable energy sector decrease the price of all electricity by 50% c. Increases in consumer confidence lead to a positive demand shock.
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In terms of the statement below, what are the 2 main factors affecting the aggregate supply curve. Explain these factors and use a diagram. "Fluctuations in employment over the business cycle bring fluctuations in real gross domestic product. However, these changes in real GDP are fluctuations around potential GDP. It is not changes in potential GDP and long run aggregate supply."
The graph to the right shows an economy's aggregate demand curve. Show the determination of the economy's long-run macroeconomic equilibrium by (i) using the Line tool to draw and label the long-run aggregate supply curve to show an equilibrium and (ii) using the Point tool to identify the equilibrium point. Label this point E. Price level Real GDP AD E
6. Suppose political turmoil causes a significant decrease in oil production in the middle east. How will real GDP, employment, and the general price level be affected in the short run? 7. How will the event described in question 6 affect real GDP, employment, and the general price level in the long run? Explain in words and a graph.
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