-Refer to the above figure. Suppose the economy's initial equilibrium is represented by the intersection of LRAS₂ and AD₂. Now there is an increase in labor productivity which increases total planned production at any given price level and aggregate demand remains stable. The resulting change in the economy's long-run equilibrium position would be represented by a
A)movement from B to D.
B)movement from C to D.
C)movement from C to B.
D)movement from A to B.

Question

-Refer to the above figure. Suppose the economy's initial equilibrium is represented by the intersection of LRAS₂ and AD₂. Now there is an increase in labor productivity which increases total planned production at any given price level and aggregate demand remains stable. The resulting change in the economy's long-run equilibrium position would be represented by a
A)movement from B to D. 
B)movement from C to D. 
C)movement from C to B. 
D)movement from A to B.

Quizplus · Accepted Answer

An increase in labor productivity shifts the long-run aggregate supply (LRAS) curve to the right, moving the equilibrium from B to D, assuming aggregate demand remains stable.

-Refer to the Above Figure