Economic growth
A) occurs when the long-run aggregate supply curve shifts upward.
B) requires a compensating decrease in aggregate demand to offset the increase in aggregate supply.
C) is an increase in potential GDP as the long-run aggregate supply curve shifts rightward.
D) All of the above answers are correct.

Question

Quizplus · Accepted Answer

Economic growth refers to an increase in potential GDP, which is represented by a rightward shift of the long-run aggregate supply (LRAS) curve. This means that the economy's ability to produce goods and services in the long run has increased. It does not necessarily require a compensating decrease in aggregate demand (AD). In fact, economic growth can lead to an increase in AD as people have more income and confidence to spend. Therefore, options A and B are incorrect.

Economic Growth