physicsamor
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What is the impact of an increase of LRAS on output and employment? I'm really confused as to how to go about on this essay (15 M) like what will be the effect on LRAS

I get that things like changes of labour supply/stock/efficiency of allocations of factor inputs can increase LRAS but how do you explain to show that these increase output and employment and such

Do I have to talk about economic growth and output gaps, I'm confused.
How do you obtain full marks?

And what kind of evaluation could I make.
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keynes24
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Is it edexcel? If that's the case it is not an essay but a long answer question. Higher LRAS causes a rise in potential economic growth (output) , employment could increase due to greater availability of jobs or due to an improvement in skills if it was caused by a rise in human capital.
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whydoidothis?
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It wants you to talk about potential growth.

Not how LRAS shifts.

If this is AQA:

4 marks for defining potential growth and the long run.

4 marks for 2 diagram(i'd do ppf and normal LRAS shift with AD the same.

now you need 7 links.

Talk about how employment would rise and then how it may have relatively no effect (if there is no increase in AD). Thats like 4 marks

Then analyse the ppf diagram for output, easily get you another 3. Use the example as your x and y axis (so cars and bikes or whatever you label the axis as for the ppf) more factors/more prodcutive factors more output bla bla increased output if operation on shifted curve.
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physicsamor
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(Original post by keynes24)
Is it edexcel? If that's the case it is not an essay but a long answer question. Higher LRAS causes a rise in potential economic growth (output) , employment could increase due to greater availability of jobs or due to an improvement in skills if it was caused by a rise in human capital.
Thank you, Im starting to understandit now
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physicsamor
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(Original post by whydoidothis?)
It wants you to talk about potential growth.

Not how LRAS shifts.

If this is AQA:

4 marks for defining potential growth and the long run.

4 marks for 2 diagram(i'd do ppf and normal LRAS shift with AD the same.

now you need 7 links.

Talk about how employment would rise and then how it may have relatively no effect (if there is no increase in AD). Thats like 4 marks

Then analyse the ppf diagram for output, easily get you another 3. Use the example as your x and y axis (so cars and bikes or whatever you label the axis as for the ppf) more factors/more prodcutive factors more output bla bla increased output if operation on shifted curve.
Oh okay, two questions I'm confused about the diagrams you mean, and I don't understand why increase on lras on employment would have relativelyno effect.
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keynes24
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(Original post by physicsamor)
Oh okay, two questions I'm confused about the diagrams you mean, and I don't understand why increase on lras on employment would have relativelyno effect.
it would make it easier to give feedback if you provide more information about the question. Examination board? level?
LRAS rising could lead to more use of machinery and cause unemployment or no significant job creation.
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physicsamor
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(Original post by keynes24)
it would make it easier to give feedback if you provide more information about the question. Examination board? level?
LRAS rising could lead to more use of machinery and cause unemployment or no significant job creation.
I'm sorry I do aqa as level I just thought that with the classical lras curve an increase in lras would increase employment but unless you mean the Keynesian curve. II probably sound like an idiot right now
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whydoidothis?
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(Original post by physicsamor)
I'm sorry I do aqa as level I just thought that with the classical lras curve an increase in lras would increase employment but unless you mean the Keynesian curve. II probably sound like an idiot right now
Basically:

The only thing that we can 100% assume with LRAS shifting right is that the productuve capacity of the economy has increased. It means we can produce more output but may not necesraily do that. For firms to make more output they need demand, if demand does not increase proportionately then the increase in the productive capacity will become spare capacity. Hence for firms to increase output they also need the demand to do it.

For the employment, if AD increases and so does LRAS it should mean more jobs are created as labour is a derived demand. If people demand more products more labour will be needed.

However this is not always the case. Like I said if there is no demand then no jobs as supply will stay the same (on a keynesian diagram). If you are using classical you can show this buy the diagram I will post at the bottom.

Also unemployment may increase, that shift in LRAS may becaused by new technology which could lead to technological unemployment (where firms basically sack workers as machines are cheaper/more productive). Just because a country can produce more does not mean it needs more workers.

Image
See you also need AD to shift sometimes. MAKE SURE AD1 DOES NOT INTERSECT LRAS2 THO.

This is the ppf diagram: DONT START ABOUT GROWTH THO, THIS IS THE ONLY DIAGRAM I COULD FIND.

Image
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physicsamor
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(Original post by whydoidothis?)
Basically:

The only thing that we can 100% assume with LRAS shifting right is that the productuve capacity of the economy has increased. It means we can produce more output but may not necesraily do that. For firms to make more output they need demand, if demand does not increase proportionately then the increase in the productive capacity will become spare capacity. Hence for firms to increase output they also need the demand to do it.

For the employment, if AD increases and so does LRAS it should mean more jobs are created as labour is a derived demand. If people demand more products more labour will be needed.

However this is not always the case. Like I said if there is no demand then no jobs as supply will stay the same (on a keynesian diagram). If you are using classical you can show this buy the diagram I will post at the bottom.

Also unemployment may increase, that shift in LRAS may becaused by new technology which could lead to technological unemployment (where firms basically sack workers as machines are cheaper/more productive). Just because a country can produce more does not mean it needs more workers.

Image
See you also need AD to shift sometimes. MAKE SURE AD1 DOES NOT INTERSECT LRAS2 THO.

This is the ppf diagram: DONT START ABOUT GROWTH THO, THIS IS THE ONLY DIAGRAM I COULD FIND.

Image
I think im starting to understand it better, if I attempt the question, can i send it you?
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whydoidothis?
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(Original post by physicsamor)
I think im starting to understand it better, if I attempt the question, can i send it you?
Yeah.
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