Question

In: Economics

For each scenario, identify the primary shift that occurs. Suppose that COVID leads to a new...

For each scenario, identify the primary shift that occurs.

Suppose that COVID leads to a new respect for medical research and a lasting improvement of the quality of our health research institutions. How would the AD/AS model be impacted?

Question 7 options:

Short run aggregate supply shifts to the right

Long run aggregate supply shifts to the right

Short run aggregate supply shifts to the left

Long run aggregate supply shifts to the left

Aggregate demand shifts to the right

Aggregate demand shifts to the left

Solutions

Expert Solution

Here the impact to the AD/AS model will be that, Long run aggregate supply shifts to the right. It is because, in this situation the investment in medical filed will increase its production capacity. ‘If there was an increase in investment or growth in the size of the labour force this would shift the LRAS curve to the right’.

Rahul Sunny answered 2 years ago
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