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 level of technological knowledge n The quantity of physical capital n The inflation rate n The size of the labor force Suppose the economy produces real GDP of $50 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 LRAS 124 120 116 112 108 104 100 10 20 30 40 50 60 70 80 OUTPUT (Billions of dollars) Suppose the government passes a law that significantly increases the minimum wage. The policy will cause the natural rate of unemployment to which will: Not affect the long-run aggregate supply curve o Shift the long-run aggregate supply curve to the left o Shift the long-run aggregate supply curve to the right In the following table, determine how each event affects the position of the long-run aggregate supply (LRAS) curve. Direction of LRAS Curve Shift Many workers leave to pursue more lucrative careers in foreign economies. A scientific breakthrough significantly increases food production per acre of farmland. A government-sponsored training program increases the skill level of the workforce. PRICE LEVEL శ్రీ శ్లీ్
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 level of technological knowledge n The quantity of physical capital n The inflation rate n The size of the labor force Suppose the economy produces real GDP of $50 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 LRAS 124 120 116 112 108 104 100 10 20 30 40 50 60 70 80 OUTPUT (Billions of dollars) Suppose the government passes a law that significantly increases the minimum wage. The policy will cause the natural rate of unemployment to which will: Not affect the long-run aggregate supply curve o Shift the long-run aggregate supply curve to the left o Shift the long-run aggregate supply curve to the right In the following table, determine how each event affects the position of the long-run aggregate supply (LRAS) curve. Direction of LRAS Curve Shift Many workers leave to pursue more lucrative careers in foreign economies. A scientific breakthrough significantly increases food production per acre of farmland. A government-sponsored training program increases the skill level of the workforce. PRICE LEVEL శ్రీ శ్లీ్
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:# The Slope and Position of the Long-Run Aggregate Supply Curve
**Monetary Policy and Its Effects:**
*Scenario*: Suppose the Federal Reserve (Fed) doubles the growth rate of the quantity of money in the economy. Consider which of the following factors this change will affect in the long run. *Select all that apply.*
- The level of technological knowledge
- The quantity of physical capital
- The inflation rate
- The size of the labor force
*Scenario*: Assume the economy produces a real GDP of $50 billion when unemployment is at its natural rate.
**Graph Instructions:**
- 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 the y-axis labeled as "Price Level," ranging from 100 to 132, and the x-axis labeled as "Output (Billions of dollars)," ranging from 0 to 80. The LRAS curve is represented by a horizontal purple line marked with a diamond.
**Policy Impact on Unemployment:**
*Scenario*: Suppose the government enacts a law that significantly raises the minimum wage. This policy will alter the natural rate of unemployment to an extent that will:
- Not affect the long-run aggregate supply curve
- Shift the long-run aggregate supply curve to the left
- Shift the long-run aggregate supply curve to the right
**Analysis of External Events:**
*Task*: In the table below, determine how each event affects the position of the long-run aggregate supply (LRAS) curve.
| Event | Direction of LRAS Curve Shift |
|--------------------------------------------------------------------------------|-------------------------------|
| Many workers leave to pursue more lucrative careers in foreign economies. | |
| A scientific breakthrough significantly increases food production per acre of farmland. | |
| A government-sponsored training program increases the skill level of the workforce. | |
Use this information to understand the implications of monetary policy and structural changes on the long-run capabilities of an economy.
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