When potential GDP increases,the potential GDP line ________,and the aggregate supply curve ________.
A)shifts rightward;shifts rightward
B)shifts leftward;shifts rightward
C)shifts rightward;shifts leftward
D)shifts leftward;shifts leftward
E)shifts rightward;does not shift

Question

Quizplus · Accepted Answer

When potential GDP increases, it means that the economy is able to produce more goods and services using its available resources. This is represented in the model by a rightward shift in the potential GDP line.

As a result of the increase in potential output, the aggregate supply curve also shifts rightward. This is because firms are now able to produce more goods and services at every price level.

Therefore, the correct answer is A: shifts rightward; shifts rightward.

When Potential GDP Increases,the Potential GDP Line ________,And the Aggregate