Question

Year to year rightward shifts in​ long-run aggregate supply leads to A. a​ long-run trend path for real GDP. B. decreases in the production possibilities curve. C. inflation. D. shifts in aggregate demand.

Answer 1

Answer:

The correct answer is A. a​ long-run trend path for real GDP

Explanation:

Let us first observe the point where the aggregate supply is equal to the aggregate demand, that is, the equilibrium point. We can find this point in the following diagram; It is where the aggregate supply curve, OA, and the aggregate demand curve, DA, intersect, showing real equilibrium GDP and the equilibrium price level in the economy.

When production has a relatively low price level, companies have little incentive to produce, although consumers may be willing to buy a high quantity. As the price level of the goods and services produced increases, the aggregate supply increases and the aggregate demand decreases until reaching the equilibrium point.