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AS/AD help

A movement along the Aggreggate supply curve indicates an increase in output therefore a probability to increase labour force, correct?

A shift in the AS curve indicates a shift in the PPF therefore meaning an increase in total output and therefore also increase in labour force?

Also, with the question how would an increase in government spending affect economic growth, how can I apply it to boom/recession scenarios?

Reply 1

samthemiller

Original post by Kolasinac138

1) Yes, and therefore an increase in inflationary pressures (explaining why the Keynesian AS curve tends to infinity)
2) A shift doesn't necessarily mean there is an increase in labour force, it may just mean that the current labour force is being used more effectively, e.g. through training schemes/ higher education
3) The government would aim to spend counter-cyclically, as their spending affects AD. This means during a boom, they would reduce the size of the budget deficit, and possibly go into budget surplus (reducing AD, reducing inflationary pressures therefore increases stability in prices), and during a recession they would spend to shift AD to the right to encourage others to start spending again

Reply 2

itsn0b0dy

"A movement along the Aggreggate supply curve indicates an increase in output therefore a probability to increase labour force, correct?"
no, a shift along the AS curve does not mean an increase in the labour force. It means that more of the existing factors of production are used, for example, a fall in unemployment.

"A shift in the AS curve indicates a shift in the PPF therefore meaning an increase in total output and therefore also increase in labour force?"
not necessarily the labour force. It could mean any of the four factors of production. And it doesn't just mean an increase in the quantity of factors of production, it could also mean an increase in the quality of factors of production e.g. increase in education and training leading to increased productivity leading to a rise in production and so the PPC shifts out.

"Also, with the question how would an increase in government spending affect economic growth, how can I apply it to boom/recession scenarios?"
not quite sure what you're meaning here. try to stick to the question because I don't see how the economic cycle comes into things. but everything the guy above said is logical and makes sense. However, his first two points are incorrect.

Reply 3

Kolasinac138

So if I was to talk about increasing employment, is it possible to say an increase in employment is caused by a shift in LRAS due to a shift in PPF and productive capacity?

Reply 4

furquan

Original post by Kolasinac138

So if I was to talk about increasing employment, is it possible to say an increase in employment is caused by a shift in LRAS due to a shift in PPF and productive capacity?

A shift in the LRAS and PPF are the same. You don't have to talk about PPF

Reply 5

itsn0b0dy

Original post by Kolasinac138

So if I was to talk about increasing employment, is it possible to say an increase in employment is caused by a shift in LRAS due to a shift in PPF and productive capacity?

no, the economic reasoning would be an increase in employment would meaning a larger workforce, leading to an increase in the productive capacity of the UK economy, which would in turn lead to a shift outwards of LRAS and the PPF.

As the guy above mentioned, a shift outwards of the PPF and LRAS are actually the same thing demonstrated on different diagrams.

hope that helps x