Explain and demonstrate graphically the effects of a negative supply shock in both the short-run and long-run
What will be an ideal response?
See figure below.
The supply shock decreases short-run aggregate supply from AS1 to AS2, reducing real output and raising inflation rate, or from points 1 to 2 in the graph. In the long run, the supply curve eventually adjusts back to the original position as wages fall. The economy adjusts from 2 back to 1.
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Which of the following is not evidence of the lower standard of living among less- developed countries?
a. high per capita income b. high death rates c. high infant mortality rate d. low life expectancy e. high birth rate
The principle of "comparable worth" asserts that people with comparable, if not identical, skills and responsibilities should receive the same pay. If this principle were to become law, it would tend to
a. reduce the problem of the "cost disease of services." b. exacerbate the problem of the "cost disease" of the service sector. c. be irrelevant to the "cost disease" problem. d. eliminate the problem of externalities.