Chapter 10: Q. 2CTQ (page 225)
How are deficiencies in the U.S. river system affecting the extent to which the U.S. long-run aggregate supply curve shifts rightward each year?
Because of the lower capacity, long-term aggregate supply is expected to fall, and the curve will shift to the left.
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How could a return of the U.S. population growth rate to its previous level reduce the disinflationary effect of secular stagnation?
Identify the combined shifts in long-run aggregate supply and aggregate demand that could explain the following simultaneous occurrences,
a. An increase in equilibrium real GDP and an increase in the equilibrium price level
b. A decrease in equilibrium real GDP with no change in the equilibrium price level
c. An increase in equilibrium real GDP with no change in the equilibrium price level
d. A decrease in equilibrium real GDP and a decrease in the equilibrium price level
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.
10-13. Explain whether each of the following events would cause a movement along or a shift in the curve, other things being equal. In each case, explain the direction of the movement along the curve or shift in its position.
a. Deflation has occurred during the past year.
b. Real GDP levels of all the nation's major trading partners have declined.
c. There has been a decline in the foreign exchange value of the nation's currency,
d. The price level has increased this year.
Take a look at the panel (a) of Figure 10-6. In the absence of a change in aggregate demand, what effect does economic growth have on the price level over time, other things being equal? Why?
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