When potential GDP increases,
A)the AS curve shifts rightward.
B)there is a movement up along the AS curve.
C)the AS curve shifts leftward.
D)there is a movement down along the AS curve.
E)there is neither a movement along nor a shift in the AS curve.

Question

Quizplus · Accepted Answer

Potential GDP is the maximum output that an economy can produce when all resources are fully employed. When potential GDP increases, it implies that the economy is able to produce more output at any given price level. This would cause a rightward shift in the AS curve, indicating that firms are willing to supply more output at each price level.

When Potential GDP Increases