The long-run aggregate supply curve will shift outward to the right when
A)there is economic growth.
B)the price level decreases.
C)the real-balance effect increases.
D)the amount of labor decreases.

Question

Quizplus · Accepted Answer

Economic growth leads to an increase in the factors of production, such as labor, capital, and technology, which shifts the long-run aggregate supply curve to the right. Choice B is incorrect because a decrease in the price level causes movement along the aggregate supply curve, not a shift. Choice C is incorrect because the real-balance effect is a short-run phenomenon that affects aggregate demand, not aggregate supply. Choice D is incorrect because a decrease in the amount of labor would shift the long-run aggregate supply curve to the left.

The Long-Run Aggregate Supply Curve Will Shift Outward to the Right