Exhibit 14A-5 Macro AD-AS Model

-Economic growth is represented in Exhibit 14A-5 by a:
A) leftward shift in the long-run aggregate supply curve (LRA
S).
B) inward shift of the production possibilities curve.
C) rightward shift in the long-run aggregate supply curve (LRA
S).
D) movement along the long-run aggregate supply curve (LRA

Question

Exhibit 14A-5 Macro AD-AS Model
 
-Economic growth is represented in Exhibit 14A-5 by a:
A) leftward shift in the long-run aggregate supply curve (LRA
S). 
B) inward shift of the production possibilities curve. 
C) rightward shift in the long-run aggregate supply curve (LRA
S). 
D) movement along the long-run aggregate supply curve (LRA

Quizplus · Accepted Answer

Economic growth is represented by an increase in potential output, which is reflected by a rightward shift in the LRAS curve. This shift indicates that the economy can produce more goods and services at any given price level. Leftward shift in the LRAS would represent a decrease in potential output. B is incorrect because the production possibilities curve represents the maximum combinations of two goods that can be produced in an economy. D is incorrect because movement along the LRAS curve does not reflect economic growth, but rather a temporary change in the price level.