What variables cause the short-run aggregate supply curve to shift? For each variable, identify whether an increase in that variable will cause the short-run aggregate supply curve to shift to the right or to the left
What will be an ideal response?
The variables that will cause the short-run aggregate supply to shift are: the size of the labor force, the size of the capital stock, productivity, the expected future price level, workers and firms adjusting to having previously underestimated the price level, and the expected price of an important natural resource. Increases in the labor force, the capital stock, or productivity will cause the short-run aggregate supply curve to shift to the right. Increases in the expected future price level, increases in the price of an important natural resource, and workers and firms adjusting to having previously underestimated the price level will cause the short-run aggregate supply curve to shift to the left.
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In the figure above, the substitution effect outweighs the income effect in all segments EXCEPT
A) 0a. B) 0c. C) bc. D) cd.
Juanita worked for a defense contractor in the United States. During the 2008 recession, the government cut spending and Juanita and ninety-nine others were laid off. In such a case, the unemployment Juanita is experiencing is _____
a. cyclical b. structural c. seasonal d. frictional e. voluntary