Question

1. For each of the following events, *explain with specificity, WHY (the reason) *and state HOW (increase, decrease or no effect) the event described affects long-run aggregate supply of the United States. The United States experiences a wave of immigration. (why and how) Scientists develop highly sophisticated and reliable robots equipped with Artificial Intelligence. (why and how) (b)

Answer 1

1.

A.

Wave of immigration brings people of different capabilities, skills and experiences that add value to the USA economy. It adds new dimension to the workforce present in the USA and productivity increases. It causes an increase in the log run aggregate supply and it shifts to the right direction.

Besides, these immigrants also increase the aggregate demand that is to be catered by the aggregate supply. Hence, in the long run, the LRAS increases in the US economy.

B.

Development of robot with AI is the technological advancements. It increases the resource level, capabilities and productivity in the economy. Hence, it increases the LRAS and it moves to the right direction. It happens because, resource level of the economy has increased with the presence of robots that can work effortlessly, with least number of errors and who can make right decisions using artificial intelligence. It makes output level of the economy in the long run to increases with higher productivity level. So, LRAS increases and shifts to the right.