Increases in potential output shift:
A) the long-run aggregate supply curve.
B) the short-run aggregate supply curve.
C) both the long-run aggregate supply curve and the short-run aggregate supply curve.
D) the long-run aggregate supply curve, the short-run aggregate supply curve, and the dynamic aggregate demand curve.

Question

Quizplus · Accepted Answer

Increases in potential output reflect an economy's capacity to produce goods and services, which shifts both the long-run and short-run aggregate supply curves to the right, indicating an increase in the economy's productive capacity.

Increases in Potential Output Shift