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22 December, 23:59

Indicate whether each of the following events will increase, decrease, or have no effect on long-run aggregate supply.

1. The United States experiences a wave of immigration.

2. Congress raises the minimum wage to $10 per hour.

3. Intel invents a new and more powerful computer chip.

4. A severe hurricane damages factories along the East Coast.

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  1. 23 December, 00:16
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    1. Increased Immigration will increase long-run aggregate supply

    2. Raise in minimum wage by $10 will increase long-run aggregate supply.

    3. Invention of new and more powerful chip will increase long-run aggregate supply

    4. Severe hurricane damages to factories will reduce aggregate supplies but on the short run.

    Explanation:

    1. Increased Immigration will increase long-run aggregate supply because there will be more factors (human capital) to be used in production and as a result output and supply will increase.

    2. Raise in minimum wage will increase long-run aggregate supply because increase in wages makes workers to become more efficient and motivated and the effect is increased and improved output which directly implies increased aggregate long-run supplies

    3. Invention of new and more powerful chip will increase long-run aggregate supply because it indicates an improvement in factor (input) quality, which implies that same number of intel computer chips will produce more output (increased aggregate supply)

    4. Severe hurricane damages to factories will temporarily reduce aggregate supplies on the short run, as soon as the natural disasters are over and the factories reconstructed, supply will return to normal on the long run.
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