What is the result of a decrease in the LAS curve?
A)It will raise the price level and raise Real GDP.
B)It will raise the price level and decrease Real GDP.
C)It will lower the price level and raise Real GDP.
D)It will lower the price level and decrease Real GDP.
E)It will leave the price level unchanged and decrease Real GDP.

Question

Quizplus · Accepted Answer

A decrease in the LAS curve represents a negative shift in the long-term supply potential of the economy. This can be due to factors such as a decrease in productivity, a decrease in the availability of resources, or an increase in regulations. As a result, the price level will increase due to a decrease in the supply of goods and services, and Real GDP will decrease as the economy is producing less.

What Is the Result of a Decrease in the LAS