All Flashcards
How does increased investment in education affect LRAS?
Increases the quality of labor, shifting LRAS to the right.
How does a technological breakthrough in manufacturing affect LRAS?
Increases productivity, shifting LRAS to the right.
How does a decrease in the size of the workforce affect LRAS?
Decreases the quantity of labor, shifting LRAS to the left.
How do government subsidies for research and development affect LRAS?
Encourage technological advancement, shifting LRAS to the right.
How does the depletion of natural resources affect LRAS?
Decreases the quantity of resources, shifting LRAS to the left.
How does improved infrastructure affect LRAS?
Increases productivity and efficiency, shifting LRAS to the right.
How do tax incentives for capital investment affect LRAS?
Encourage firms to invest in new technology and equipment, shifting LRAS to the right.
How does a decline in the quality of education affect LRAS?
Reduces the skills of the workforce, shifting LRAS to the left.
How does an increase in immigration affect LRAS?
Increases the size of the workforce, shifting LRAS to the right.
How does a natural disaster that destroys capital affect LRAS?
Decreases the quantity of capital, shifting LRAS to the left.
Define Long-Run Aggregate Supply (LRAS).
Potential output of an economy when all resources are fully employed.
What is full employment in the context of LRAS?
The natural rate of unemployment, the lowest sustainable level.
What does the vertical LRAS curve indicate?
Output is determined by resources and technology, not the price level.
Define full employment output (YF).
The level of output when all resources are fully employed at the natural rate of unemployment.
What is potential output?
The maximum amount of goods and services an economy can produce when all its resources are fully employed.
Define capital stock.
The total amount of physical goods existing at a particular time that have been produced for use in the production of other goods and services.
What is the natural rate of unemployment?
The unemployment rate that exists when the economy is producing at its potential output.
Define productivity.
The quantity of goods and services produced from each unit of labor input.
What is meant by 'quality of resources'?
The level of education, skills, and technology available in an economy.
Define economic growth in the context of LRAS.
An increase in the potential output of an economy, represented by a rightward shift of the LRAS curve.
How do tax incentives for research and development affect LRAS?
Promote technological advancement, shifting LRAS to the right.
How does government investment in infrastructure affect LRAS?
Increases productivity and efficiency, shifting LRAS to the right.
How do policies that encourage immigration affect LRAS?
Increase the size of the workforce, shifting LRAS to the right.
How do policies that improve education quality affect LRAS?
Enhance the skills of the workforce, shifting LRAS to the right.
How do policies that protect property rights affect LRAS?
Encourage investment and innovation, shifting LRAS to the right.
How do policies that increase the minimum wage affect LRAS?
May reduce employment and productivity, potentially shifting LRAS to the left.
How do policies that restrict trade affect LRAS?
Limit access to resources and technology, potentially shifting LRAS to the left.
How do policies that increase government debt affect LRAS?
May crowd out private investment, potentially shifting LRAS to the left.
How do policies that promote competition affect LRAS?
Encourage innovation and efficiency, shifting LRAS to the right.
How do policies that reduce regulation affect LRAS?
May increase investment and productivity, shifting LRAS to the right.