### 5. The slope and position of the long-run aggregate supply curve**Scenario:**Suppose the Federal Reserve (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 size of the labor force- [ ] The inflation rate- [ ] The price level- [ ] The level of technological knowledge**Given Information:**Suppose the economy produces a real Gross Domestic Product (GDP) of $70 billion when unemployment is at its natural rate.**Instruction:**Use the purple points (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve on the graph.**Graph Explanation:**The graph has two axes:- The **horizontal axis (X-axis)** represents **OUTPUT** measured in billions of dollars, ranging from 0 to 80 billion dollars.- The **vertical axis (Y-axis)** represents the **PRICE LEVEL**, ranging from 100 to 132.On the graph, a purple line marked with diamond-shaped data points represents the LRAS curve which is labeled as 'LRAS'. The LRAS curve is vertical, signifying that in the long run, output (real GDP) is determined by factors such as the labor force, technological advancement, and natural resources, and is not affected by changes in the price level. Under natural rate conditions, the economy's output is $70 billion, denoted by the LRAS line intersecting the $70 billion mark on the X-axis. ### Understanding the Impact of Policies on Long-Run Aggregate Supply (LRAS) CurveConsider a scenario where the government enacts legislation that diminishes unemployment benefits, prompting unemployed individuals to seek employment more actively. This policy is presumed to alter the natural rate of unemployment in a certain way. Evaluate how this change will influence the long-run aggregate supply (LRAS) curve.**Question: The policy will cause the natural rate of unemployment to ________, which will:**- Not affect the long-run aggregate supply curve- Shift the long-run aggregate supply curve to the right- Shift the long-run aggregate supply curve to the left### Event Impact on the LRAS Curve In the table below, determine how each event impacts the position of the long-run aggregate supply (LRAS) curve:| Event | Direction of LRAS Curve Shift ||-----------------------------------------------------------------------------|-------------------------------|| The government allows more immigration of working-age adults who find work. | ➡️ || A scientific breakthrough significantly increases food production per acre of farmland. | ➡️ || A government-sponsored training program increases the skill level of the workforce. | ➡️ |**Explanation of the Graph:**The table outlines the potential shifts in the LRAS curve resulting from various events. An increase in immigration of working-age adults, an agricultural scientific breakthrough, and improved workforce skills are all expected to shift the LRAS curve to the right, signifying an increase in the economy's productive capacity.

Aggregate Supply curve is the sum of all the supplies within a country over a period. It is upward…

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 size of the labor force The inflation rate The price level The level of technological knowledge 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) curve on the graph. (?) 132 128 124 120 116 112 108 104 100 PRICE LEVEL 0 10 20 40 50 30 60 OUTPUT (Billions of dollars) 70 80 › LRAS

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 size of the labor force The inflation rate The price level The level of technological knowledge 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) curve on the graph. (?) 132 128 124 120 116 112 108 104 100 PRICE LEVEL 0 10 20 40 50 30 60 OUTPUT (Billions of dollars) 70 80 › LRAS

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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