Which of the following changes shifts the long-run aggregate supply curve to the right?
A)A demographic change that increases the labor supply
B)A decrease in the demand for labor
C)An increase in consumer confidence
D)A decrease in taxes (assuming Ricardian equivalence doesn't hold)

Question

Quizplus · Accepted Answer

A demographic change that increases the labor supply, such as an increase in immigration or a higher birth rate, would increase the number of available workers, leading to a rightward shift in the long-run aggregate supply curve. This is because there would be more factors of production available, increasing the potential output of the economy.

Option B is incorrect because a decrease in the demand for labor would lead to a leftward shift in the aggregate supply curve, as it would lead to a decrease in employment and potentially decrease potential output.

Option C is incorrect because an increase in consumer confidence would not affect the factors of production and would only impact the short-run aggregate supply curve.

Option D is incorrect because the effect of tax changes on the long-run aggregate supply curve is ambiguous and depends on whether or not the Ricardian equivalence holds.

Which of the Following Changes Shifts the Long-Run Aggregate Supply