An increase in the long-run aggregate supply curve indicates that
A) the natural rate of unemployment has increased.
B) unemployment has increased.
C) the general level of prices has increased.
D) potential real GDP has increased.

Question

Quizplus · Accepted Answer

An increase in the long-run aggregate supply curve indicates that potential real GDP has increased, meaning that the economy is capable of producing more goods and services at a given price level. This is because long-run aggregate supply is determined by factors such as technology, capital stock, and labor force, which improve over time and increase an economy's productive capacity.

An Increase in the Long-Run Aggregate Supply Curve Indicates That