In terms of the production function Y = A₀ x F(L,K₀) where A is the state of technology, L the level of
Employment and K the stock of capital:

Question

In terms of the production function Y = A₀ x F(L,K₀) where A is the state of technology, L the level of Employment and K the stock of capital:

Quizplus · Accepted Answer

B) is correct because an increase in the labor force (L) directly increases the potential output by providing more labor for production, which shifts the Long-Run Aggregate Supply (LAS) curve to the right, indicating an increase in the economy's capacity to produce goods and services.

In Terms of the Production Function Y = A0 X

In Terms of the Production Function Y = A₀ X