ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Increased population and productivity
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Increased consumption
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Increased government transfers
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Decreased taxes
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Detailed explanation-1: -An increase in the production factors causes the curve to shift to the right, while a decline in the production factors will lead to a leftward shift. The primary production factors that cause the changes in the LRAS curve include labor productivity levels, workforce size, capital size, and education levels.
Detailed explanation-2: -Shifts in LRAS Over time, the LRAS is likely to move out to the right, as the capacity (or potential output) of the economy increases. This also means the production possibility frontier has shifted outwards. It can be described as a movement along the growth path. This is what economists call long run economic growth.
Detailed explanation-3: -Factors that shift the long-run aggregate supply include labor changes, capital changes, natural resources, and technology changes.
Detailed explanation-4: -Note that with increased productivity, workers can produce more GDP. Thus, full employment corresponds to a higher level of potential GDP, which we show as a rightward shift in LRAS from LRAS0 to LRAS1 to LRAS2. Shifts in Aggregate Supply (a) The rise in productivity causes the SRAS curve to shift to the right.