-Refer to the above figure. Suppose the economy's initial equilibrium is represented by the intersection of LRAS₁and AD₁. Now there is an increase in labor productivity which increases total planned production at any given price level and aggregate demand remains stable. The resulting change in the economy's long-run equilibrium position would be represented by a

Question

-Refer to the above figure. Suppose the economy's initial equilibrium is represented by the intersection of LRAS<sub>1 </sub>and AD<sub>1</sub>. Now there is an increase in labor productivity which increases total planned production at any given price level and aggregate demand remains stable. The resulting change in the economy's long-run equilibrium position would be represented by a A) movement from B to D. B) movement from C to D. C) movement from C to B. D) movement from A to B.

Quizplus · Accepted Answer

An increase in labor productivity shifts the Long-Run Aggregate Supply (LRAS) curve to the right, moving the equilibrium from the initial point to a new point where the new LRAS intersects the unchanged Aggregate Demand (AD) curve.

-Refer to the Above Figure