Question

Settings Suppose an economy experiences technological progress and this causes a shift in the LRAS curve. Which of the following should not​ occur?
A. There will be reduced pressure on prices as the economy has the ability to produce more real GDP.
B. There should be a shift to the right in the SRAS curve because the increased technology reduces the cost of producing goods in the economy.
C. There will be an increase in government purchases as the economy has more income.
D. There should be an increase in the amount of income which will cause an increase in AD.

Answer 1

Answer:

C) There will be an increase in government purchases as the economy has more income.

Explanation:

The long run aggregate supply (LRAS) curve includes the output of an economy when all the factors of production are being used at full capacity. The position of the LRAS curve depends on the number of​ workers, the amount of​ capital, and the available technology.

Every time an economy (or even a company) experiences a significant technological progress, its productivity increases, increasing the total output.