Question

If DACA (Deferred Action for Childhood Arrivals) legislation is defeated and not renewed, leading to an immediate deportation of 1 to 11 million non-citizens, what would be the immediate impact on the AD-AS graph?

AD shifts left

LRAS shifts left

AD shifts right

not enough information

SRAS shifts right

Answer 1

Immediate deportation of non citizens will lead to leftward shift of demand curve immediately because there would be some proportion of non citizens which were labor class and affect producers in their producing goods which change aggregate supply. On the other hand, all of them were consuming food to stay alive. Deportaton of them will reduce consumption / investment by them which will result in aggregate demand falling and shift demand curve to its left. Option A is correct.