Explain for each event whether it changes the quantity of real GDP supplied, short-run aggregate supply, long-run aggregate supply, or a combination of them

Question

What will be an ideal response?

Answer 1

• Automotive firms in the United States switch to a new technology that raises productivity.
When firms switch to a new technology, both the short-run aggregate supply and the long-run aggregate supply increase.
• Toyota and Honda build additional plants in the United States.
Building new plants in the United States increases the U.S. capital stock and thereby increases both the short-run aggregate supply and the long-run aggregate supply.
• The prices of auto parts imported from China rise.
The increase in the price of auto parts imported from China decreases the short-run aggregate supply because the cost of producing automobiles increases. There is no effect on the long-run aggregate supply.
• Autoworkers agree to a lower money wage rate.
The lower money wage rate increases short-run aggregate supply because the cost of producing automobiles falls. There is no effect on the long-run aggregate supply.
• The U.S. price level rises.
The increase in the price level increases the short-run quantity of real GDP supplied. It has no effect on the long-run quantity of real GDP supplied.