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Chapter 23: Q 5. (page 617)

If the labor force becomes more productive over time, how would the long-run aggregate supply curve be affected?

Short Answer

Expert verified

Long-run aggregate supply curve shifts to the right.

Step by step solution

01

Step 1. Define aggregate demand and aggregate supply.

Aggregate demand is defined as the total amount of demand produced in the economy for all finished goods and services.

Aggregate supply, often known as total production, is the total amount of products and services in a given economy over a certain time period at a given overall price.

02

Step 2. How would the long-run aggregate supply curve be affected?

As the labor force becomes more productive over time, the overall amount of labor supplied in the economy rises. This improves the long-run aggregate supply curve by shifting it to the right and raising potential output.

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Most popular questions from this chapter

In its statement dated June 14,2017 , the Federal Open Market Committee indicated that inflation "is running somewhat below 2% . Go to http://research stlouisfed .org/fred2/, and click on the Series ID link "CPIAUCSL" (Consumer Price Index for All Urban Consumers: All Items-SA). Then click on the link "Percent Change from Year Ago." What has happened to the inflation rate since the time of the last reported value in Figure 16 ?

If the unemployment rate is above the natural rate of unemployment, holding other factors constant, what will happen to inflation and output?

Identify three factors that can shift the aggregate demand curve to the right and three different factors that can shift the aggregate demand curve to the left.

“The appreciation of the dollar from 2012 to 2017 had a negative effect on aggregate demand in the United States.” Is this statement true, false, or uncertain? Explain your answer.

Suppose the inflation rate remains relatively constant while output decreases and the unemployment rate increases. Using an aggregate demand and supply graph, show how this scenario is possible.
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