What is the difference between the long-run aggregate supply and the short-run aggregate supply curves?
What will be an ideal response?
The long-run aggregate supply curve, LAS, is the relationship between the price level and real GDP when real GDP equals potential GDP. The LAS curve is vertical. Along the LAS curve, both the prices of goods and services and the prices of resources, such as the money wage rate, change. The short-run aggregate supply curve, SAS, is the relationship between the price level and the quantity of real GDP supplied in the short run when the money wage rate and other resource prices are constant. The SAS curve slopes upward. Along the SAS curve, only the price level changes; the money wage rate and other resource prices are constant. The SAS curve shifts leftward when the money wage rate (or other costs) rise.
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If the price of the capital intensive product rises more than does the price of the land intensive product, then
A) the relative price of the capital intensive product will fall to some point between the pretrade relative prices. B) demand will shift away from the capital-intensive product, and its production will decrease. C) demand will shift away from the capital-intensive product, and its production will decrease relative to that of the land intensive product. D) the production of the capital-intensive product will decrease, but by less than production of the land-intensive product. E) the country that exports the capital-intensive good will lose its comparative advantage.
Labor productivity is calculated by dividing GDP by
a. population. b. the price level. c. capital stock d. labor force.