Intertemporal substitution causes a positive productivity shock to:
A) make the LRAS curve less steep.
B) make the LRAS curve steeper.
C) shift the LRAS curve farther to the right.
D) shift the LRAS curve farther to the left.

Question

Quizplus · Accepted Answer

Intertemporal substitution refers to the ability of consumers to shift their consumption patterns over time, in response to changes in relative prices. This can lead to higher savings and investment, which can increase the capital stock and potential output of an economy. As a result, the LRAS curve shifts farther to the right, indicating higher long-run potential output.

Intertemporal Substitution Causes a Positive Productivity Shock To