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1.2 Aggregate supply due by April 8 (Fri) 1. Explain why the aggregate-supply (AS) curve is vertical under full price exibility (long run), but upward-sloping
1.2 Aggregate supply due by April 8 (Fri) 1. Explain why the aggregate-supply (AS) curve is vertical under full price exibility (long run), but upward-sloping under nominal-wage rigidity (short run). [Review question NOT to be handed in] 2. Explain how each of the following factors may affect LRAS and SRAS reSpectively. In particular, explain whether and in which direction each of the building blocks of LRAS and SRAS viz., labor supply (N3), labor demand (Nd), capital supply (K s) , capital demand (Kd) , and the production function as well as the aggregate supply (AS) curves themselves may shift in reSponse to the changes below. (a) A rise in the labor force participation rate (LFPR). (b) A natural disaster (e.g., tsunami) that destroys some capital stock (e.g., houses and equipment) without killing any people. (c) A new technological innovation (e.g., launch of 6G) that raises the marginal pro- ductivity of both labor and capital inputs
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