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 right.
B) 1 and 2 both shift long-run aggregate supply left.
C) 1 shifts long-run aggregate supply right, 2 shifts long-run aggregate supply left.
D) 1 shifts long-run aggregate supply left, 2 shifts long-run aggregate supply right.

Question

Quizplus · Accepted Answer

Increasing immigration leads to an increase in the labor force, which will shift the long-run aggregate supply curve to the right. This is because the economy can produce more output with more workers.

Making trade more open also leads to an increase in long-run aggregate supply as it can lead to increased competitiveness, lower prices, and access to better technology and production processes from other countries.

Therefore, both policies would lead to a shift in the long-run aggregate supply curve to the right, resulting in higher output in the long run.

A Candidate for Political Office Announces the Following Policies Which