Question

A candidate for political office announces the following policies which, he says, economics clearly demonstrates will lead to higher output in the long run. 1. reduce immigration from abroad 2. make trade more open between the US and other countries.

Answer 1

Answer:

1. False 2. True

Explanation:

1. The candidate for political office announcing that the policy to reduce immigration from abroad which, he says, economics clearly demonstrates will lead to higher output in the long run; is false.

What increases output are the factors of production of which labor is a major component. When there are more people willing and able to work in an economy, they help companies to produce more output but that is not the case when immigration is reduced, obviously that would reduce productivity and output.

2. However his second claim is right, that making trade more open between the US and other countries will increase output on the long run.

Trade barriers like tariffs and duties impede the level of trade between countries which could either reduce the amount of money countries make after netting off custom duties or the price of imported goods are increased by the effect of tariffs. Increased price means reduced demand

Hence if tariffs are replaced with subsidies in open trade, prices of U.S imported goods will fall and demand will increase.

Answer 2

Answer:

B) 1 shifts long-run aggregate supply left, 2 shifts long-run aggregate supply right

Explanation:

Full question

A candidate for political office announces the following policies which, he says, economics clearly demonstrates will lead to higher output in the long run: 1. increase immigration from abroad 2 make trade more open between the US and other countries. A) 1 and 2 both shift long-run aggregate supply left

B) 1 shifts long-run aggregate supply left, 2 shifts long-run aggregate supply right

C) 1 and 2 both shift long-run aggregate supply right.

D) 1 shifts long-run aggregate supply right, 2 shifts long-run aggregate supply left.

Aggregate supply, is the total supply of goods and services produced within an economy at a particular period and a specific price. It is also known as total output The increase in immigration from abroad will not increase aggregate supply or the total output thereby shifting the aggregate supply left meaning a decrease. Making trade more open between the US and other countries will increase the total output in the long run therby shifting the aggregate supply right meaning an increase in the total supply of goods and services produced in a particular period.