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In: Economics

Assume that there is an increase in the labor productivity in an economy. What will happen...

  1. Assume that there is an increase in the labor productivity in an economy. What will happen to the LRAS? Show it graphically using the labor market and the production function and explain.
  2. Assume that there is an increase in population in an economy. (for example, migration) What will happen to the LRAS? Show it graphically using the labor market and the production function and explain.
  3. AD-AS and Phillip Curve Model, Money Market and Banking System

    1. Why does the aggregate demand curve have a negative slope?

    2. Why is the long run aggregate supply curve vertical?

    3. Why does the short run aggregate supply curve have a positive slope?

    4. Graphically illustrate an economy in the long run equilibrium, producing at the full employment level of production. Indicate the equilibrium Price level (P*) and the level of real GDP (Y*)

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