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Chapter 10: Q. 1 CTQ (page 225)

As more of the nation's systems of river locks become deficient, what is happening to the pace at which the U.S. production possibilities curve shifts outward over time?

Short Answer

Expert verified

This is not possible to transport at the same time and cost. The rate where the PPF shifts will be reduced as a result of this.

Step by step solution

01

Production potential.

A production possibilities curve can be related to the economy's long-run aggregate supply curve. The nation's output potential is controlled by its long-run aggregate supply. Reduced assets in the form of bridges will limit the economy's production potential.

02

Roadways goods.

This is especially true as more and more roadways become insufficient, unable to convey goods at the same cost and in the same amount of time. The rate at which the PPF shifts will be slowed as a result of this.

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Most popular questions from this chapter

Explain whether each of the following events would cause a movement along or a shift in the position of the L.RAS curve, other things being equal. In each case, explain the direction of the movement along the curve or shift in its position.

a. Last year, businesses invested in new capital equipment, so this year the nation's capital stock is higher than it was last year.

b. There has been an 8 percent increase in the quantity of money in circulation that has shifted the $A D$ curve.

c. A hurricane of unprecedented strength has damaged oil rigs, factories, and ports all along the nation's coast.

d. Inflation has occurred during the roast year as a result of rightward shifts of the $A D$ curve.

In Ciudad Barrios, El Salvador, the latest payments from relatives working in the United States have finally arrived. When the credit unions open for business, up to 150 people are already waiting in line. After receiving the funds their relatives have transmitted to these institutions, customers go off to outdoor markets to stock up on food or clothing or to appliance stores to purchase new refrigerators or televisions. Similar scenes occur throughout the developing world, as each year migrants working in higher-income, developed nations send around $200 billion of their earnings back to their relatives in less developed nations. Evidence indicates that the relatives, such as those in Ciudad Barrios, typically spend nearly all of the funds on current consumption.

a. Based on the information supplied, are developing countries' income inflows transmitted by migrant workers primarily affecting their economies' long-run aggregate supply curves or aggregate demand curves?

b. How are equilibrium price levels in nations that are recipients of large inflows of funds from migrants likely to be affected? Explain your reasoning.

Suppose that during the past $3$ years, equilibrium real GDP in a country rose steadily, from $450$ billion to $500$ billion, but even though the position of its aggregate demand curve remained unchanged, its equilibrium price level steadily declined, from $110$ to $103$ . What could have accounted for these outcomes, and what is the term for the change in the price level experienced by this country?

Evaluate the meaning of long-run equilibrium for the economy as a whole and explain why economic growth can cause deflation

Suppose that the long-run aggregate supply curve is positioned at a real GDP level of $$ 18$ trillion in base-year dollars, and the long-run equilibrium price level (in index number form) is 115 . What is the full-employment level of nominal GDP?

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