This Application illustrates A) how U.S. domestic ...

[jman1234]

This Application illustrates
 
  A) how U.S. domestic manufacturers of auto parts have been adversely affected in recent years.
  B) that U.S. parts manufacturers are now facing increasing global pressures.
  C) the trade-offs inherent in a global economy.
  D) all of the above.

Question 2

Over the last decade, a country experiences a significant increase in labor productivity.
 
  a. Draw and label a labor market supply and demand diagram. Show how the equilibrium real wage rate and the equilibrium quantity of labor change as productivity increases.
  b. Draw and label a production function. Show how potential GDP changes as labor productivity increases.

[mammy1697]

Answer to Question 1

D

Answer to Question 2

a. The figure above shows the effect of an increase in productivity in the labor market. The increase in productivity shifts the labor demand curve rightward and, as illustrated, raises the real wage rate and increases the quantity of employment.

b. The production function shifts upward as shown in the figure. Potential GDP increases for two reasons: there is a greater quantity of labor, and the new production function is higher than the old one.