If the current price of steel rises but there is no change in steel industry capacity,the LRAS will not fall as a result.

Question

Quizplus · Accepted Answer

The Long-Run Aggregate Supply (LRAS) curve represents the potential output of an economy given its productive capacity and resources. If the current price of steel rises, it will affect the cost of production for firms that use steel as an input. As a result, these firms may increase their prices, causing a short-term increase in inflation. However, if there is no change in the steel industry capacity, it will not affect the productive capacity of the economy, and the LRAS curve will not shift. Thus, the answer is true that the LRAS will not fall as a result.

If the Current Price of Steel Rises but There Is