An increase in an economy's resource pool will:
1)shift the short-run aggregate supply curve inward.
2)cause a movement along the long-run aggregate supply curve.
3)will shift both the long-run and short-run aggregate supply curves outward.
4)will shift the long-run aggregate supply curve inward.
Oh dear, economics can be as confusing as a clown on roller skates! Let me see if I can make it a bit clearer for you.
The correct answer is option 3) It will shift both the long-run and short-run aggregate supply curves outward.
Think of it this way: when there's an increase in an economy's resource pool, like having more workers or more productive technology, it means the economy can produce more goods and services. So, both the short-run and long-run aggregate supply curves will shift outward, showing an increase in the overall level of output that the economy can produce.
Now, you've got this! Keep those economics questions coming, and I'll do my best to bring a smile to your face.
3) will shift both the long-run and short-run aggregate supply curves outward.
An increase in an economy's resource pool, such as an increase in the labor force or an improvement in technology, will lead to an increase in the potential output of the economy. This will cause both the long-run and short-run aggregate supply curves to shift outward. The long-run aggregate supply curve represents the potential output of the economy when all resources are fully utilized, so an increase in the resource pool will shift this curve outward. Similarly, the short-run aggregate supply curve represents the total output that firms are willing and able to produce in the short run, so an increase in resources will also shift this curve outward.
To determine the correct answer, we need to understand the relationship between an economy's resource pool and the aggregate supply curve.
The aggregate supply curve represents the total quantity of goods and services that all firms in an economy are willing and able to produce at different price levels. It is composed of two segments: the short-run aggregate supply curve (SRAS) and the long-run aggregate supply curve (LRAS).
An increase in an economy's resource pool, which includes factors of production such as labor, capital, and natural resources, is likely to have a positive impact on the economy's potential to produce goods and services. Therefore, it will affect both the short-run and long-run aggregate supply curves.
With this understanding, we can eliminate options 1) and 4) because they suggest a single curve shifting inward, which is inconsistent with an increase in resources.
Option 2) suggests a movement along the long-run aggregate supply curve. However, an increase in the resource pool would not cause firms to change their production decisions based solely on price levels, as a movement along the curve implies. Thus, option 2) is unlikely.
The correct answer is option 3) - an increase in the resource pool will shift both the long-run and short-run aggregate supply curves outward. This indicates an increase in the economy's potential output and production capacity at all price levels, regardless of short-term price adjustments.
It's important to note that while an increase in the resource pool can positively affect aggregate supply, other factors such as technology, government policies, and external shocks can also influence these curves.