-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, from LRAS2 to LRAS3, moving the equilibrium from point B to point D.

-Refer to the Above Figure