According to Figure 17.7,a shift in the long-run aggregate supply from LRAS₁ to LRAS₂ would most likely result from A)An increase in government spending. B)An increase in labor skills. C)A decrease in transfer payments.

Question

Quizplus · Accepted Answer

A shift in the long-run aggregate supply (LRAS) curve indicates a change in potential output or the economy's ability to produce goods and services. An increase in labor skills, such as through education and training, would likely increase productivity and efficiency, leading to an outward shift in the LRAS curve. An increase in government spending or a decrease in transfer payments would affect aggregate demand, not LRAS.