Refer to the graph. It is given that the economy is at an initial equilibrium at point A. In the mainstream economic view, the effect of a signi?cant increase in productivity on the economy can
Best be represented by a shift from
A) $\mathrm { AS } _ { \mathrm { LR } 2 } \text { to } \mathrm { AS } _ { \mathrm { LR1 } }$
B) $A D _ { 1 } \text { to } A D _ { 2 }$
C) $AS _ { } { } _ { \mathrm { LR } 1 } \text { to } A S _ { \mathrm { LR } 2 } \text {. }$
D) $A D _ { 2 } \text { to } A D _ { 1 }$

Question

Refer to the graph. It is given that the economy is at an initial equilibrium at point A. In the mainstream economic view, the effect of a signi?cant increase in productivity on the economy can
Best be represented by a shift from
A) $\mathrm { AS } _ { \mathrm { LR } 2 } \text { to } \mathrm { AS } _ { \mathrm { LR1 } }$ 
B) $A D _ { 1 } \text { to } A D _ { 2 }$ 
C) $AS _ { } { } _ { \mathrm { LR } 1 } \text { to } A S _ { \mathrm { LR } 2 } \text {. }$ 
D) $A D _ { 2 } \text { to } A D _ { 1 }$

Quizplus · Accepted Answer

According to the mainstream economic view, an increase in productivity will shift the long-run aggregate supply (LRAS) curve to the right. This is because an increase in productivity will mean that more goods and services can be produced at every price level, which will increase the potential output of the economy. Therefore, the best choice is C, which shows a shift from LRAS1 to LRAS2.

Refer to the Graph ASLR2 to ASLR1\mathrm { AS } _ { \mathrm { LR } 2 } \text { to } \mathrm { AS } _ { \mathrm { LR1 } }ASLR2​ to ASLR1​

Refer to the Graph $\mathrm { AS } _ { \mathrm { LR } 2 } \text { to } \mathrm { AS } _ { \mathrm { LR1 } }$