Question

5. The slope and position of the long-run aggregate supply curve 

Which of the following factors will influence the position of the long-run aggregate supply curve? Check all that apply 

The price level 

The quantity of physical capital 

The amount of available natural resources 

The size of the labor force 

Suppose the economy produces real GDP of $30 bwwion when unemployment is at its natural rate. On the following graph, use the purple line (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve. 

 Suppose the government passes a law that reduces unemployment benefits in a way that causes unemployed workers to seek out new Jobs more quickly. The policy will cause the natural rate of unemployment to _______ , which will:

 Not affect the long-run aggregate supply curve rise

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

 Shit the long-run aggregate supply curve to the left

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

Answer 1

The following factors influence the position of the long - run aggregate supply curve:

1. The quantity of physical capital

2. The size of the labor force.

LRAS would be a vertical line with $30 Real GDP.

The government policy will cause the natural rate of unemployment to rise, which will shift the long run aggregate supply curve to the right.

Event 1 - LRAS to the left

Event 2 - LRAS to the right

Event 3 - LRAS to the left