Explain whether each of the following events increases,...

Explain whether each of the following events increases, decreases, or has no effect on long-run aggregate supply. a. The United States experiences a wave of immigration. b. Congress raises the minimum wage to $\$ 15$ per hour. c. Intel invents a new and more powerful computer chip. d. A severe hurricane damages factories along the East Coast.

Explain whether each of the following events increases, decreases, or has no effect on long-run aggregate supply.
a. The United States experiences a wave of immigration.
b. Congress raises the minimum wage to $\$ 15$ per hour.
c. Intel invents a new and more powerful computer chip.
d. A severe hurricane damages factories along the East Coast.

Key Concepts

Physical Capital and Infrastructure

The state of physical capital, including factories and infrastructure, is crucial for production capacity. Events like a severe hurricane that damages factories reduce the available productive capacity, shifting the LRAS curve to the left until repairs or rebuilding restore the capital stock.

Technological Progress

Technological advancements, such as breakthroughs in computer chip design, improve production efficiency and productivity. This allows the economy to produce more goods and services with the same amount of resources, effectively shifting the LRAS curve to the right over time.

Labor Force Changes

Changes in the labor force, such as an influx of immigrants, increase the available labor resources. A larger workforce can raise the economy's production capacity, thereby shifting the LRAS curve to the right in the long run.

Long-Run Aggregate Supply (LRAS)

LRAS represents the maximum sustainable level of production in an economy when all resources are fully utilized. It is determined by the economy's productive capacity, which depends on factors like the labor force, technology, capital stock, and institutional efficiency.

Wage Policy and Aggregate Supply

Policies like raising the minimum wage can affect the allocation of resources in the short run, potentially increasing production costs for some industries. However, unless these policies directly change the productive capacity or efficiency of the economy, their effects on LRAS are generally neutral in the long run.

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