The graph shows the aggregate demand (AD) curve and thelong-run aggregate supply (LRAS) curve for a hypotheticaleconomy. Suppose that the economy observes an increase inthe human capital of workers, causing productivity to rise.Show the effect of this change by shifting one of the curvesin the graph.LRASHow will this change affect the rate of inflation?Inflation will fallInflation will rise,Inflation will be unchanged.ADHow will this change affect the growth rate?Real GDP growth rateThe growth rate will decrease.The growth rate will increase.The growth rate will be unchanged.

Question
Asked Mar 8, 2019
324 views
The graph shows the aggregate demand (AD) curve and the
long-run aggregate supply (LRAS) curve for a hypothetical
economy. Suppose that the economy observes an increase in
the human capital of workers, causing productivity to rise.
Show the effect of this change by shifting one of the curves
in the graph.
LRAS
How will this change affect the rate of inflation?
Inflation will fall
Inflation will rise,
Inflation will be unchanged.
AD
How will this change affect the growth rate?
Real GDP growth rate
The growth rate will decrease.
The growth rate will increase.
The growth rate will be unchanged.
help_outline

Image Transcriptionclose

The graph shows the aggregate demand (AD) curve and the long-run aggregate supply (LRAS) curve for a hypothetical economy. Suppose that the economy observes an increase in the human capital of workers, causing productivity to rise. Show the effect of this change by shifting one of the curves in the graph. LRAS How will this change affect the rate of inflation? Inflation will fall Inflation will rise, Inflation will be unchanged. AD How will this change affect the growth rate? Real GDP growth rate The growth rate will decrease. The growth rate will increase. The growth rate will be unchanged.

fullscreen
check_circle

Expert Answer

Step 1

Increase in human capital:

If Human capital of workers increase in an economy, then the long-run aggregate supply (LRAS) curve increase and leads to shift outward. Increase in long run aggregate supply curve (LRAS) leads to shift the (LRAS) curve to (LRAS’) and this cause to decrease the inflation rate and increases the growth rate.

Step 2

Figure -1 shows the change in hum...

fullscreen

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Economics

Related Economics Q&A

Find answers to questions asked by student like you

Show more Q&A add
question_answer

Q: Fiscal Policy- Ask FRED The accompanying graph depicts the unemployment insurance benefits paid by t...

A: The graph shows that the unemployment insurance spending in the peak of 2008-2009  as percentage of ...

question_answer

Q: Suppose that in 2011, Mexico's total government outlays were 657 billion pesos and total government ...

A: We are given:Total outlay/ Total expenditure of Mexican government= 657 billion pesosTotal Revenue o...

question_answer

Q: Consider the graphs, which show aggregate supply (AS) and the change in aggregate demand (AD) from A...

A: 1.)Rightward shift in aggregate demand (AD) curve:The central bank uses the Open market operation to...

question_answer

Q: If the Fed wants to increase the money supply, it will ______ Treasury bonds. A) buy B) sell C) hold...

A: The correct option is A.

question_answer

Q: There are several ways that governments can increase or decrease the money supply. Match the descrip...

A: Money supply is the stock of money in circulation in an economy in a given time period.Open market o...

question_answer

Q: in International Relations, what is ‘Dominance’ in IR Theory?  Instruments of  dominance? Concept of...

A: International relations (IR) theory is an analysis of IR from a theoretical point of view where IR m...

question_answer

Q: Transmission and Amplification Mechanisms- Ask FRED When a borrower fails to make a scheduled paymen...

A: a.Transmission and amplification mechanisms:From the given graph, the approximate delinquency rate i...

question_answer

Q: 12. (Table: Labor Force Data) Using the data from the table Labor Force Data, suppose the labor fo...

A: Let us first define some concepts related to labor force participation rate.Labor force: In an econo...

question_answer

Q: 1)  The Framers envisioned a president who would? A) Be directly Responsible to the people  B) Be di...

A: If the framers (the persons who is responsible to generate a policy, system or a plan) are wished to...