The situation shown above can be described as
Question 14Thelong-run aggregate supply curve shifts outward when:
Question 15Thelong-run aggregate supply curve
Question 16The position of thelong-run aggregate supply curve is determined byA. the open economy effect.B. the production possibilities curve.Your answer is correct.C. thelong-run aggregate demand curve.D. the interest rate effect.At any point on the production possibilitycurve, the economy is operating at full employment. Production on the production possibility curve represents potential real output. Thelong-run aggregate supply curve is a vertical line demonstrating theeconomy's potential real output of goods and services.
Question 17The long-run aggregate supply curve,LRAS,is a verticalline determined by amounts of available resources such as labor and capital and by technology and resource productivity. The position of the LRASgives the full-information and full-adjustment level of real GDP per year.The naturalrate of unemployment occurs at the long-run level of real GDP per year given by the position of the LRAS.If labor or capital increases from year to year or if the productivity of either of these resources rises from one year to the next, the LRASshifts rightward.In a growing economy, therefore, real GDP per year gradually increasesover time.