Question

1a. From about some time in the 1950s until about 2010, prime age male labor force participation declined. This would tend to:

(a) shift both the short-run and the long-run aggregate supply curves to the left

(b) shift both the short-run and the long-run aggregate supply curves to the right

(c) shift only the short-run aggregate supply curve to the left

(d) shift only the long-run aggregate supply curve to the left

2a. In the 1970s, there was a large and sustained increase in the price of oil, as a result:

(a) both the short-run aggregate supply curve and the long-run aggregate supply shifted to the left

(b) only the long-run aggregate supply shifted to the left

(c) the aggregate demand curve shifted to the left

(d) the short-run aggregate supply curve shifted to the left and long-run aggregate supply did not shift

3a. Suppose that Congress passes an investment tax credit that is sustained and eventually leads to a higher level of capital. At first ____________________, and over a longer period of time, the long-run aggregate supply curve will _____________.

(a) only the long-run aggregate supply curve shifts and it shifts to the right, the long-run aggregate supply curve will shift to right a bit more

(b) only the aggregate demand curve changes and it shifts to the left, remain

(c) only the long-run aggregate supply curve shifts and it shifts to the right, the long-run aggregate supply curve will return to its original position

(d) only the aggregate demand curve changes and it shifts to the right, also shift to the right

Answer 1

1. Option a is correct. From about sometime in the 1950s until about 2010, prime age male labor force participation delined. This woukd tend to a shift both short run and long run aggregate supply curve. Because reduction in labour decline production both in short run and long run. All other options are wrong because labor supply is shift factor of both LRAS and SRAS. Decline in labor supply reduce production. Therefore both curves shifts left
2. Option a is correct. In the 1970s, there was large and sustained increase in the price of oil, as a resuly both short run aggregate supply curve and long run aggregate supply curve left. Because increase in price of oil increases their cost of production
All other options are wrong. Because increase in price of oil will not shift both LRAS and SRAS shifts to right.
3 Option a and b is correct. Suppose that congress passed an investment tax credit and that is sustained and eventually leads to higher level of capital. At first, *aggregate demand will increase* and over a longer period of time, the long run aggregage supply curve will *shift rightward*