Question
4) Macroeconomists agree that increases in long run Aggregate Supply are best for the economy. List...
4) Macroeconomists agree that increases in long run Aggregate Supply are best for the economy. List all the possible policies and actions that the federal government could do to encourage increases in labor productivity, capital productivity, and advances in technology. Illustrate one of the them graphically using the Keynesian Model of Aggregate Demand and Aggregate Supply.
Homework Answers
Answer #1
Government can pursue following strategies to increase labor, capital productivity and technological improvement-
It can start on the job training where workers will learn new skills to work more efficiently.
It can invest in education to increase human capital.
It can invest in research and development sector to develop new innovations.
Increase in labor productivity, capital productivity or technical innovation leads to rightward shift in AS and LRAS both that results in increase in output and decrease in price level.
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