Over time in a growing economy, the long-run aggregate supply curve will
A) become increasingly steep.
B) shift rightward.
C) become horizontal at the long-run potential price level.
D) shift leftward.

Question

Quizplus · Accepted Answer

As the economy grows over time, factors such as technological advancements and increases in capital and labor force lead to an increase in potential output. This causes the long-run aggregate supply curve to shift rightward, indicating that more goods and services can be produced at every price level. Therefore, choice B is the correct answer. A is incorrect because the long-run aggregate supply curve is typically depicted as a vertical line, indicating that potential output is fixed. C is incorrect because although the long-run aggregate supply curve does represent the potential output of the economy, it is not necessarily horizontal. D is incorrect because a leftward shift of the long-run aggregate supply curve would indicate a decrease in potential output, which is unlikely in a growing economy.

Over Time in a Growing Economy, the Long-Run Aggregate Supply