22-11. Explain the short-run impact of each of the following. A discovery that m
ID: 1238101 • Letter: 2
Question
22-11. Explain the short-run impact of each of the following.A discovery that makes cold fusion a reality, greatly reducing the cost of producing energy
An increase in the payroll tax
21-9. Suppose that virtually everyone in the United States decides to take life a little easier, and the length of the average workweek falls by 25%. How will that affect GDP? Per capita GDP? How will it affect economic welfare?
22-2. Explain why a change in one component of aggregate demand will cause the aggregate demand curve to shift by a multiple of the initial change.
Explanation / Answer
. Explain the short-run impact of each of the following.
A discovery that makes cold fusion a reality, greatly reducing the cost of producing energy
A
1.This shifts the production function upward and adds to the demand and productivity of labor.
2.Real wages increase, employment increases, and output increases.
3 The LAS curve shifts outward and the SAS curve shifts downward, lowering the price level as output expands.
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1.Adds to business wage costs shifting the SAS curve upward.
2.it also reduces consumption causing the AD curve to shift to the left unless offset by more government spending.
3.The higher wage rate would eventually be matched by a higher price level that causes the real wage clear the labor market with no permanent effect on real output.
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