The long run equilibrium level of real output increases whenever:
A)AD increases.
B)SRAS increases.
C)LRAS increases.
D)Any of the above occurs.

Question

The long run equilibrium level of real output increases whenever:
A)​AD increases.
B)​SRAS increases.
C)​LRAS increases.
D)​Any of the above occurs.

Quizplus · Accepted Answer

Only an increase in LRAS, the long run aggregate supply, can lead to a permanent increase in the equilibrium level of real output. An increase in AD or SRAS may lead to a temporary increase in the short run, but in the long run, the economy will adjust and return to the potential output level determined by LRAS. Therefore, the only choice that is correct is C.

The Long Run Equilibrium Level of Real Output Increases Whenever