1. determine whether each change listed in table 3 - 3.1 will cause an increase, decrease, or no change in…

1. determine whether each change listed in table 3 - 3.1 will cause an increase, decrease, or no change in aggregate supply (as). always start with as.\n2. in column 1, list which component of as is affected: input prices or productivity.\n3. in column 2, draw an up arrow if the change will cause an increase in as, a down arrow if it will cause a decrease in as, and write nc if it will not change as.\n4. in column 3, write the number of the as curve after the change. (using graph below)\ntable 3 - 3.1\nchanges in aggregate supply\n| change | 1. determinant of as | 2. change in as | 3. resulting as curve |\n|--|--|--|--|\n| (a) unions are more effective so that wage rates increase. | | | |\n| (b) opec successfully increases oil prices. | | | |\n| (c) labor productivity increases dramatically. | | | |\n| (d) giant natural gas discovery decreases energy prices. | | | |\n| (e) computer technology brings new efficiency to industry. | | | |\n| (f) government spending increases. | | | |\n| (g) cuts in tax rates increase incentives to save and invest. | | | |\n| (h) low birth rate will decrease the labor force in the future. | | | |\n| (i) research shows that improved schools have increased the skills of american workers and managers. | | | |\npl\nas1 as\nas2\ny(real gdp)

1. determine whether each change listed in table 3 - 3.1 will cause an increase, decrease, or no change in aggregate supply (as). always start with as.\n2. in column 1, list which component of as is affected: input prices or productivity.\n3. in column 2, draw an up arrow if the change will cause an increase in as, a down arrow if it will cause a decrease in as, and write nc if it will not change as.\n4. in column 3, write the number of the as curve after the change. (using graph below)\ntable 3 - 3.1\nchanges in aggregate supply\n| change | 1. determinant of as | 2. change in as | 3. resulting as curve |\n|--|--|--|--|\n| (a) unions are more effective so that wage rates increase. | | | |\n| (b) opec successfully increases oil prices. | | | |\n| (c) labor productivity increases dramatically. | | | |\n| (d) giant natural gas discovery decreases energy prices. | | | |\n| (e) computer technology brings new efficiency to industry. | | | |\n| (f) government spending increases. | | | |\n| (g) cuts in tax rates increase incentives to save and invest. | | | |\n| (h) low birth rate will decrease the labor force in the future. | | | |\n| (i) research shows that improved schools have increased the skills of american workers and managers. | | | |\npl\nas1 as\nas2\ny(real gdp)

Answer

Brief Explanations:

  1. (A): Higher wage rates (input price) due to union - power increase costs for firms, decreasing aggregate supply (AS). Determinant is input prices, AS decreases (down - arrow), and the curve shifts to AS1.
  2. (B): Increased oil prices (input price) by OPEC raise production costs, reducing AS. Determinant is input prices, AS decreases (down - arrow), and the curve shifts to AS1.
  3. (C): Higher labor productivity increases output per worker, increasing AS. Determinant is productivity, AS increases (up - arrow), and the curve shifts to AS2.
  4. (D): Lower energy prices (input price) reduce production costs, increasing AS. Determinant is input prices, AS increases (up - arrow), and the curve shifts to AS2.
  5. (E): New efficiency from computer technology boosts productivity, increasing AS. Determinant is productivity, AS increases (up - arrow), and the curve shifts to AS2.
  6. (F): Government spending affects aggregate demand, not aggregate supply directly. So, determinant is none for AS, no change in AS (NC), and the curve remains AS.
  7. (G): Tax - rate cuts affect incentives for saving and investment, mainly impacting aggregate demand in the short - run and not directly affecting AS. So, determinant is none for AS, no change in AS (NC), and the curve remains AS.
  8. (H): A future decrease in the labor force reduces potential output, decreasing AS. Determinant is productivity (as labor is a key input), AS decreases (down - arrow), and the curve shifts to AS1.
  9. (I): Improved skills of workers and managers increase productivity, increasing AS. Determinant is productivity, AS increases (up - arrow), and the curve shifts to AS2.

Answer:

Change 1. Determinant of AS 2. Change in AS 3. Resulting AS curve
(A) Input prices $\downarrow$ AS1
(B) Input prices $\downarrow$ AS1
(C) Productivity $\uparrow$ AS2
(D) Input prices $\uparrow$ AS2
(E) Productivity $\uparrow$ AS2
(F) None NC AS
(G) None NC AS
(H) Productivity $\downarrow$ AS1
(I) Productivity $\uparrow$ AS2