2.3.3 LRAS

• How does unemployment relate to job switching?

  Unemployment decreases as people switch jobs.
• What is the impact of government regulations on LRAS?

  They can increase the size of the workforce.
• How can government regulations encourage people to work?

  By decreasing inactivity and encouraging job return.
• How can free childcare affect unemployment?

  It can entice stay-at-home moms back to work.
• What effect does reducing benefits have on unemployment?

  It encourages benefit recipients to find jobs.
• How can changing the working age impact LRAS?

  It expands the workforce and increases production.
• What is the relationship between workforce size and LRAS?

  A larger workforce shifts LRAS to the right.
• How can government policy affect research and development?

  By offering tax breaks to incentivize investment.
• What is the effect of increased research on LRAS?

  It improves productivity and increases LRAS.
• How can lowering corporation tax affect LRAS?

  It increases entrepreneurial activity and output.
• What is the impact of high regulation on LRAS?

  It limits LRAS by increasing costs and time.
• How does immigration affect LRAS?

  Higher immigration increases the workforce and LRAS.
• What factors influence the value of immigration on LRAS?

  Age and skills of the immigrants matter.
• How does an ageing population affect LRAS?

  It lowers LRAS due to a smaller workforce.
• What is the relationship between competition policy and LRAS?

  It promotes efficiency and increases LRAS.
• How can less competition sometimes benefit LRAS?

  It encourages investment and innovation.
• What role do copyright laws play in innovation?

  They protect ideas, encouraging more research.
• What does a rightward shift of the LRAS indicate?

  Economies can produce more goods and services.
• What can cause supply-side shocks to the LRAS curve?

  Technological advancements or wars can cause shocks.
• How do technological advances affect LRAS?

  They shift LRAS right by speeding up production.
• What is the effect of increased investment in technology on LRAS?

  It increases LRAS by enhancing production capacity.
• How does productivity relate to LRAS?

  Higher productivity increases LRAS with same resources.
• What factors influence productivity in an economy?

  Efficiency, labor skill, and technology matter.
• How does a skilled workforce affect LRAS?

  It increases output per worker, shifting LRAS right.
• What is the classical view of the LRAS curve?

  It is vertical and independent of price level.

  
• What does the vertical LRAS curve represent?

  Maximum potential output with current resources.
• How does Keynes' view differ from the classical view of LRAS?

  He believed AS can be disequilibrium for years.
• What happens to wages and prices when LRAS is vertical?

  Wages and prices fall when unemployment exists.

  
• What does 'sticky downwards' mean in relation to wages?

  Wages do not fall below a certain level.
• What factors prevent wages from falling too low?

  Unions, business risks, and minimum wage laws.
• How does high unemployment affect wage offers?

  Firms do not need to offer high wages.
• What happens as employment rises between points A and B?

  Firms must offer higher wages to attract workers.
• How do changes in tax rates affect SRAS?

  Higher taxes shift SRAS left; subsidies shift right.
• What are supply-side shocks?

  Significant changes affecting production factors.
• What limits supply increase in the long run?

  Availability of people and machines limits supply.
• How do wage rates behave on the LRAS curve?

  Wage rates are variable and can change.
• What does the classical view state about long-run AS?

  It is determined by production factors and technology.
• What does LRAS measure?

  It measures a country's potential output.
• What is the relationship between LRAS and PPF?

  LRAS shows productive potential linked to PPF.
• What can cause an economy to exceed maximum potential LRAS?

  Allowing factors to work overtime temporarily.