Worksheet 8 - Answer Key

Worksheet 8 - Answer Key - Introduction to Macroeconomics...

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Introduction to Macroeconomics Econ 104 a,c,d,e,f – Spring 2010 Worksheet 8 – Supply-Side Economics, Unemployment and Inflation 1. What are things that can shift the AS curve? What has happened to productivity in the U.S over the last 40 years? In the shorter-run, things that can increase the AS Curve (shift right) are: cost-cutting measures, such as better engineering or management practices, Cost-cutting measures such as technological innovation, and Increases in the Labor Force. Shorter-run things that can decrease the AS Curve (shift left) include: Rising costs of inputs, Decreases in the Labor Force, and supply shocks, prices unexpectedly rising in a market or markets…examples: OPEC oil price increases of 1974, hurricane Katrina. Shifts in the AS that are longer term (increases in the level of full employment) happen due to changes in: The quantity of resources available, Productivity of resources (such as labor productivity) and new or better technology. Productivity in the U.S. has remained very strong over the last 40 years. 2. What were the main economic problems of 1979,80? Briefly, very high inflation, and high unemployment. We had inflation even though the economy was not doing well. (Oil prices…OPEC). And then there was the disco thing.
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