Which of the following situations will cause the LRAS to shift rightward?
A)when both an advance in technology and an increase in the capital stock occur
B)when both a decrease in the capital stock and a decrease in the amount of labour available for production occur
C)when both an increase in the capital stock and a decrease in the natural resources that are available for production occur
D)when both an advance in technology and a decrease in the amount of labour available for production occur

Question

Quizplus · Accepted Answer

An advance in technology and an increase in the capital stock will increase the productivity of labour and lead to an increase in potential output, causing the LRAS to shift rightward. Option B will cause a leftward shift in the LRAS due to the decrease in productive inputs. Option C may cause a shift either way depending on the magnitude of the changes in productive inputs. Option D may cause no significant shift in the LRAS as the positive impact of technological advancement may be offset by the negative impact of reduced labour availability.

Which of the Following Situations Will Cause the LRAS to Shift