Immigration and Capacity
The question
Over the past decade the economy of Tavane has admitted a large and sustained inflow of working-age immigrants, permanently enlarging its labor force. Show only the resulting change in the economy's productive capacity, holding the other curves fixed for this exercise. Show the effect on the AD-AS Model graph.
Drag a curve, or use the arrow buttons. Want the free-play version with every control? Open this graph in the sandbox.
Immigration and Capacity: the worked answer
On the AD-AS Model graph, LRAS shifts right.
Why LRAS shifts right
A permanent increase in the labor force adds to the quantity of resources available to the economy, which raises its full-employment level of output. On the AD-AS graph this is shown as a rightward shift of long-run aggregate supply, the vertical line marking potential output. Because the question asks only for the change in productive capacity, aggregate demand and short-run aggregate supply are held fixed for this exercise.
What happens to the equilibrium
Potential real GDP increases, while the current equilibrium price level and output are unchanged until the other curves adjust.
The mistake students make on this one
Students frequently shift AD right instead, since more people means more consumers. The prompt asks specifically about productive capacity, and a permanently larger labor force is an increase in the economy's resources, which is recorded only by LRAS.
On exam day
Read the time frame before you draw. Words like permanently or over the past decade signal a capacity question and therefore LRAS, while this year or in the short run signal AD or SRAS.
How this is graded
The checker reads every curve's position before and after your answer. You are marked correct only when LRAS shifts right and every other curve on the AD-AS Model graph stays where it started — the same standard an AP reader applies to a drawn graph: the right shift, and nothing extra. There is no AI involved; the rubric is the geometry.
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