Which of the following could explain why there is an increase in potential GDP but the equilibrium level of GDP falls?
A)SRAS shifted to the right by more than LRAS.
B)AD shifted to the right by more than SRAS.
C)AD shifted to the right by less than SRAS.
D)AD did not shift and SRAS shifted to the left.

Question

Quizplus · Accepted Answer

If the AD did not shift and SRAS shifted to the left, the equilibrium GDP would fall despite an increase in potential GDP, as the leftward shift in SRAS would reduce output at the current price level.

Which of the Following Could Explain Why There Is an Increase