Question

Which of the following will shift the long-run aggregate supply curve to the right?

a. all of the answers presented here are correct.
b. an increase in net exports
c. an increase in interest rates
d. an increase in consumption
e. an increase in the productivity of workers

Answer 1

An increase in worker productivity leads to a rightward shift in the long-run aggregate supply curve by enabling firms to produce more output at every price level, which corresponds to a higher level of potential GDP.

Step-by-step explanation:

An increase in the productivity of workers will shift the long-run aggregate supply (LRAS) curve to the right. Productivity growth is a crucial factor for the LRAS since it determines how much output can be produced with a given quantity of labor. Over time, as productivity increases, the same amount of labor can produce more output, resulting in a rightward shift of the LRAS curve.

In the long run, advancements such as improved technology that enhance productivity allow firms to produce greater quantities of output at every price level. Consequently, a higher level of productivity corresponds to a higher level of potential GDP. This is illustrated by the AS curve shifting from LRAS to a new, more rightward position, leading to increased output without increasing price levels.