5 Steps to a 5 AP Macroeconomics, 2014-2015 Edition by Eric R. Dodge

Author:Eric R. Dodge
Language: eng
Format: epub
Publisher: McGraw-Hill Education
Published: 2013-10-15T00:00:00+00:00

Long-Run Shifts

There are a few main factors that affect both long-run and short-run AS and fundamentally affect the level of full employment in a nation’s macroeconomy:

• Availability of resources. A larger labor force, larger stock of capital, or more widely available natural resources can increase the level of full employment.

• Technology and productivity. Better technology raises the productivity of both capital and labor. A more highly trained or educated populace increases the productivity of the labor force. These factors increase long-run AS over time.

• Policy incentives. Different national policies like unemployment insurance provide incentives for a nation’s labor force to work. If policy provides large incentives to quickly find a job, full-employment real GDP rises. If government gives tax incentives to invest in capital or technology, GDPf rises.

Example:

In the 1990s, the U.S. economy saw dramatic increases in technology and investment in the capital stock. This period produced a significant increase in the real GDP at full employment, as shown in Figure 9.5.

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