Question

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 inflation rate The quantity of physical capital The size of the labor force The price level 

Suppose the economy produces real GDP of $60 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.

Suppose the government passes a law that significantly increases the minimum wage, The policy will cause rate of unemployment to rise/fall, which will:  

Shift the long-run aggregate supply curve to the left fall 

Shift the long-run aggregate supply curve to the right 

Not affect the long-run aggregate supply curve 

In the following table, determine how each event affects the position of the long-run aggregate supply (LRAS) curve. 

Direction of LRAS Curve Shift 

The government allows more Immigration of working-age adults who find work. 

For environmental and safety reasons, the government requires that the country's nuclear power plants be permanently shut down. 

A natural disaster destroys a significant amount of the economy's production facilities.

Answer 1

Q1) options 1, 4

In long run, changes in money supply only affects nominal variables, no effect on real Variables

So prices & inflation rate is affected

.

Graph

LRAS is Vertical at Y = 60

.

1) rise in Minimum wages will cause Unemployment rate to rise

MCQ: option 1)

LRAS shifts to left

Table

Scenario	effect
Allows more immigration	right
Nuclear plants shut down	left
Natural disaster destroys	left