Question

immigration leads to a larger workforce.
there is a decrease in the velocity of money.
the development of smart phones increases worker productivity.
there is a decrease in the money supply.
a natural disaster destroys a nations infrastructure, reducing the stock of capital.
classify the events according to their impact on either long - run aggregate supply (lras) or aggregate demand (ad).
ad increases
ad decreases
lras increases
lras decreases
answer bank

Explanation:

• AD increases: Immigration leads to a larger workforce. This increases the number of consumers in the economy, which in turn increases aggregate demand (AD) as more people are buying goods and services.
• AD decreases:
• There is a decrease in the velocity of money. Velocity of money is the rate at which money is exchanged in an economy. A decrease in velocity means that money is changing hands less frequently, so the overall demand for goods and services (AD) decreases.
• There is a decrease in the money supply. A lower money supply means there is less money available for consumers and businesses to spend, which reduces aggregate demand.
• LRAS increases: Immigration leads to a larger workforce. A larger workforce means more labor is available for production, which increases the long - run aggregate supply (LRAS) as the economy can produce more goods and services in the long run.
• LRAS decreases:
• A natural disaster destroys a nation's infrastructure, reducing the stock of capital. Less capital (e.g., factories, roads) means the economy's productive capacity is reduced, so LRAS decreases.
• The development of smart phones increases worker productivity. Wait, no - actually, if we assume a wrong scenario (maybe a miscalculation in the problem setup). But if we consider a reverse (not the case here, but for the sake of classification), if there was a factor that reduced productivity in the long - run (not the smart - phone case which actually might increase it in some models, but if we follow the problem's intention for classification): If we assume a negative productivity shock (not the smart - phone case here, but if misread as a negative), but actually, the correct ones:
• A natural disaster destroying infrastructure (capital stock reduction) reduces LRAS.

Answer:

• AD increases: Immigration leads to a larger workforce.
• AD decreases: There is a decrease in the velocity of money; There is a decrease in the money supply.
• LRAS increases: Immigration leads to a larger workforce.
• LRAS decreases: A natural disaster destroys a nation's infrastructure, reducing the stock of capital.