Readers Question: Which of the following, other things the same, would make the price level decrease and real GDP increase?
A. long-run aggregate supply shifts right
B. long-run aggregate supply shifts left
C. aggregate demand shifts right
D. aggregate demand shifts left
Diagram of AS shift to the right
In this diagram the AS curve shifts to the right, increase Real Output and decreasing the price level. This could occur due to increased productivity, better technology or improved supply side policies in the economy.
2 comments ↓
isn’t the LRAS a vertical line as the output number doesn’t change with the price.
The classical view of the LRAS is certainly inelastic. This shows a Keynesian view of LRAS which is inelastic at full capacity but also has areas of spare capacity.
Leave a Comment