Homework dueTuesday, March 9th

Be sure to write out answers to the following.

1. Explain whether each of the following events will increase, decrease, or have no effect on long-run aggregate supply:
     a. The US experiences a wave of immigration.
     b. Congress raises minimum wage to $10 an hour.
     c. Intel invents a new and more powerful computer chip.
     d. A severe hurricane damages factories along the East Coast.

2. For each of the following events, explain and diagram the short-run and long-run effects on output and the price level, assuming policymakers take no action.
     a. The stock market declines sharply, reducing consumers' wealth.
     b. The federal government increases spending on national defense.
     c. A technological improvement raises productivity.
     d. A recession overseas causes foreigners to buy fewer US goods.