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Chapter 10: Q. 1 CTQ (page 225)

As more of the nation's systems of river locks become deficient, what is happening to the pace at which the U.S. production possibilities curve shifts outward over time?

Short Answer

Expert verified

This is not possible to transport at the same time and cost. The rate where the PPF shifts will be reduced as a result of this.

Step by step solution

01

 Production potential.

A production possibilities curve can be related to the economy's long-run aggregate supply curve. The nation's output potential is controlled by its long-run aggregate supply. Reduced assets in the form of bridges will limit the economy's production potential.

02

Roadways goods.

This is especially true as more and more roadways become insufficient, unable to convey goods at the same cost and in the same amount of time. The rate at which the PPF shifts will be slowed as a result of this.

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Most popular questions from this chapter

Consider the diagram below when answering the questions that follow.

a. Suppose that the current price level is P2. Explain why the price level will decline toward P1.

b. Suppose that the current price level is P3. Explain why the price level will rise toward P1.

Explain whether each of the following events would cause a movement along or a shift in the position of the L.RAS curve, other things being equal. In each case, explain the direction of the movement along the curve or shift in its position.

a. Last year, businesses invested in new capital equipment, so this year the nation's capital stock is higher than it was last year.

b. There has been an 8 percent increase in the quantity of money in circulation that has shifted the ADcurve.

c. A hurricane of unprecedented strength has damaged oil rigs, factories, and ports all along the nation's coast.

d. Inflation has occurred during the roast year as a result of rightward shifts of theAD curve.

What would happen to the South African inflation fate in future years if the AD curve were to begin shifting rightward at a more rapid pace than the LRAS curve?

Assume that the position of a nation's aggregate demand curve has not changed, but the long-run equilibrium price level has declined. Other things being equal, which of the following factors might account for this event?

a. An increase in labor productivity

b. A decrease in the capital stock

c. A decrease in the quantity of money in circulation

d. The discovery of new mineral resources used to produce various goods

e. A technological improvement

Continuing from Problem 10-2,suppose that the full-employment level of nominal GDP in the following year rises to 21.85trillion. The long-run equilibrium price level, however, remains unchanged. By how much (in real dollars) has the long-run aggregate supply curve shifted to the right in the following year? By how much, if any, has the aggregate demand curve shifted to the right? (Hint: The equilibrium price level can stay the same only if LRAS and AD shift rightward by the same amount.)
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