If a nation's production possibilities curve shifts outward, we should expect its long-run aggregate supply curve to
A) have an upward movement along the curve.
B) have a downward movement along the curve.
C) have a rightward shift.
D) have a leftward shift.

Question

Quizplus · Accepted Answer

An outward shift in a nation's production possibilities curve indicates an increase in the economy's capacity to produce goods and services. As a result, its long-run aggregate supply curve will shift to the right, reflecting the ability to produce more output at all price levels.

If a Nation's Production Possibilities Curve Shifts Outward, We Should