Final answer:
The near-vertical shape of the SRAS curve on its far right is due to the economy being close to its potential GDP. This portion of the SRAS curve represents the neoclassical zone.
Step-by-step explanation:
The near-vertical shape of the SRAS curve on its far right is due to the economy being close to its potential GDP. This portion of the SRAS curve represents the neoclassical zone, where the economy is operating at or near its full capacity. In this zone, any increase in aggregate demand will not result in a higher output, but rather only in higher prices, leading to a near-vertical SRAS curve.
Potential GDP refers to the maximum level of output an economy can sustain over the long term without increasing inflation. It is the level of GDP when all resources, including labor and capital, are fully utilized.
Several factors can cause the SRAS curve to shift. For example, an improvement in general productivity or technological advancements can shift the SRAS curve to the right, indicating an increase in potential output. Conversely, higher input costs, such as wages or raw materials, can shift the SRAS to the left, representing a decrease in potential output.