Principles of Economics- Mankiw (5th) 690

Principles of Economics- Mankiw (5th) 690 - 714 PA R T T W...

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714 PART TWELVE SHORT-RUN ECONOMIC FLUCTUATIONS the minimum wage substantially, the natural rate of unemployment would rise, and the economy would produce a smaller quantity of goods and services. As a result, the long-run aggregate-supply curve would shift to the left. Conversely, if a reform of the unemployment insurance system were to encourage unemployed workers to search harder for new jobs, the natural rate of unemployment would fall, and the long-run aggregate-supply curve would shift to the right. Shifts Arising from Capital An increase in the economy’s capital stock increases productivity and, thereby, the quantity of goods and services supplied. As a result, the long-run aggregate-supply curve shifts to the right. Conversely, a decrease in the economy’s capital stock decreases productivity and the quantity of goods and services supplied, shifting the long-run aggregate-supply curve to the left.
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.

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