An increase in potential GDP ________ aggregate supply and ________.
A)decreases;shifts the AS curve rightward
B)increases;shifts the AS curve leftward
C)increases;shifts the AS curve rightward
D)decreases;shifts the AS curve leftward
E)has no effect on;does not shift the AS curve

Question

Quizplus · Accepted Answer

An increase in potential GDP means that an economy is capable of producing more goods and services in the long run. This higher potential output increases the availability of resources and technology which results in an increase in aggregate supply. Therefore, potential GDP increase shifts the AS curve rightward.

An Increase in Potential GDP ________ Aggregate Supply and ________

An Increase in Potential GDP Aggregate Supply and