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Chapter 10: Q. 2CTQ (page 225)
How are deficiencies in the U.S. river system affecting the extent to which the U.S. long-run aggregate supply curve shifts rightward each year?
Because of the lower capacity, long-term aggregate supply is expected to fall, and the curve will shift to the left.
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In Ciudad Barrios, El Salvador, the latest payments from relatives working in the United States have finally arrived. When the credit unions open for business, up to 150 people are already waiting in line. After receiving the funds their relatives have transmitted to these institutions, customers go off to outdoor markets to stock up on food or clothing or to appliance stores to purchase new refrigerators or televisions. Similar scenes occur throughout the developing world, as each year migrants working in higher-income, developed nations send around $200 billion of their earnings back to their relatives in less developed nations. Evidence indicates that the relatives, such as those in Ciudad Barrios, typically spend nearly all of the funds on current consumption.
a. Based on the information supplied, are developing countries' income inflows transmitted by migrant workers primarily affecting their economies' long-run aggregate supply curves or aggregate demand curves?
b. How are equilibrium price levels in nations that are recipients of large inflows of funds from migrants likely to be affected? Explain your reasoning.
This year, a nation's long-run equilibrium real GDP and price level both increased. Which of the following combinations of factors might simultaneously account for botb occurrences?
a. An isolated earthquake at the beginning of the year destroyed part of the nation's capital stock, and the nation's government significantly reduced its purchases of goods and services.
b. There was a technological improvement at the end of the previous year, and the quantity of money in circulation rose significantly during the year.
c. Labor productivity increased throughout the year, and consumers significantly increased their total planned purchases of goods and services.
d. The capital stock increased somewhat during the year, and the quantity of money in circular. tion declined considerably.
Consider Figure 10-4. What are the three effects of decreases in the price level, and do these generate upward or downward movements along the economy's aggregate demand curve?
Suppose that during the past years, equilibrium real GDP in a country rose steadily, from billion to billion, but even though the position of its aggregate demand curve remained unchanged, its equilibrium price level steadily declined, from to . What could have accounted for these outcomes, and what is the term for the change in the price level experienced by this country?
Many economists view the natural rate of unemployment as the level observed when real GDP is given by the position of the long-run aggregate supply curve. How can there be positive unemployment in this situation?
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