What does a rightward shift of the LRAS curve indicate?
Economic growth and an increase in potential output.
What does a leftward shift of the LRAS curve indicate?
A decrease in potential output and economic contraction.
On an LRAS graph, what is on the x and y axis?
Real GDP (x-axis) and Price Level (y-axis).
How does the LRAS curve relate to the Production Possibilities Curve (PPC)?
LRAS is the economy's PPC on a macroeconomic scale; shifts in LRAS are analogous to shifts in the PPC.
How is long-run equilibrium shown on an LRAS graph?
The intersection of AD, SRAS, and LRAS.
What does the vertical shape of the LRAS curve signify?
Output is independent of the price level in the long run.
How does technological advancement appear on an LRAS graph?
A rightward shift of the LRAS curve.
How does a decrease in the labor force appear on an LRAS graph?
A leftward shift of the LRAS curve.
How is the full employment output level (YF) represented on an LRAS graph?
The point where the LRAS curve intersects the x-axis (Real GDP).
How are changes in the price level represented on an LRAS graph?
Price level changes do not shift the LRAS curve, but affect the AD and SRAS curves.
How does increased investment in education affect LRAS?
Increases the quality of labor, shifting LRAS to the right.
How does a technological breakthrough in manufacturing affect LRAS?
Increases productivity, shifting LRAS to the right.
How does a decrease in the size of the workforce affect LRAS?
Decreases the quantity of labor, shifting LRAS to the left.
How do government subsidies for research and development affect LRAS?
Encourage technological advancement, shifting LRAS to the right.
How does the depletion of natural resources affect LRAS?
Decreases the quantity of resources, shifting LRAS to the left.
How does improved infrastructure affect LRAS?
Increases productivity and efficiency, shifting LRAS to the right.
How do tax incentives for capital investment affect LRAS?
Encourage firms to invest in new technology and equipment, shifting LRAS to the right.
How does a decline in the quality of education affect LRAS?
Reduces the skills of the workforce, shifting LRAS to the left.
How does an increase in immigration affect LRAS?
Increases the size of the workforce, shifting LRAS to the right.
How does a natural disaster that destroys capital affect LRAS?
Decreases the quantity of capital, shifting LRAS to the left.
How do tax incentives for research and development affect LRAS?
Promote technological advancement, shifting LRAS to the right.
How does government investment in infrastructure affect LRAS?
Increases productivity and efficiency, shifting LRAS to the right.
How do policies that encourage immigration affect LRAS?
Increase the size of the workforce, shifting LRAS to the right.
How do policies that improve education quality affect LRAS?
Enhance the skills of the workforce, shifting LRAS to the right.
How do policies that protect property rights affect LRAS?
Encourage investment and innovation, shifting LRAS to the right.
How do policies that increase the minimum wage affect LRAS?
May reduce employment and productivity, potentially shifting LRAS to the left.
How do policies that restrict trade affect LRAS?
Limit access to resources and technology, potentially shifting LRAS to the left.
How do policies that increase government debt affect LRAS?
May crowd out private investment, potentially shifting LRAS to the left.
How do policies that promote competition affect LRAS?
Encourage innovation and efficiency, shifting LRAS to the right.
How do policies that reduce regulation affect LRAS?
May increase investment and productivity, shifting LRAS to the right.
