Question

. a rise in physical capital can raise real gdp and lead to a rightward shift in the lras curve. show this relationship diagrammatically

Answer 1

A rise in physical capital can raise real GDP and lead to a rightward shift in the lras curve

In economics, the term aggregate supply curve can be defined as a curve that shows a direct association between the product price and the quantity of real GDP supplied in an economy at each price level.

A rise in the physical capital of a nation raises its long-term productivity and profits by reducing its per-unit cost.As a result, it causes a rightward shift in the aggregate supply curve in both the short- and long-term. The following image shows the same thing:

The intersection of AD, AS1, and LRAS1 yields point A as the initial equilibrium level. But when physical capital is increased, the production cost decreases, SRAS and LRAS move to the right, and point B becomes the new equilibrium level.

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