Long-Run Growth
The question
Over the past decade, the economy of Elandia has experienced substantial investment in physical capital and widespread adoption of new production technology. Show only the change in the economy's productive capacity that results, holding the other curves fixed for this exercise. Show the effect on the AD-AS Model graph.
Drag a curve, or use the arrow buttons. Want the free-play version with every control? Open this graph in the sandbox.
Long-Run Growth: the worked answer
On the AD-AS Model graph, LRAS shifts right.
Why LRAS shifts right
An increase in the capital stock and improved technology raise the economy's full-employment level of output. On the AD-AS graph this is shown as a rightward shift of long-run aggregate supply, the vertical line marking potential output. Because the question asks only for the change in productive capacity, aggregate demand and short-run aggregate supply are held fixed for this exercise.
What happens to the equilibrium
Potential real GDP increases, while the current equilibrium price level and output are unchanged until the other curves adjust.
The mistake students make on this one
Students often move SRAS right instead of LRAS, because better technology does lower costs. This prompt asks only for the change in productive capacity, and capacity on the AP graph is the vertical LRAS line, so an SRAS answer is answering a different question than the one asked.
On exam day
Only four things move LRAS: more or better labor, more capital, more natural resources, and better technology. If the event is not one of those four, LRAS does not move.
How this is graded
The checker reads every curve's position before and after your answer. You are marked correct only when LRAS shifts right and every other curve on the AD-AS Model graph stays where it started — the same standard an AP reader applies to a drawn graph: the right shift, and nothing extra. There is no AI involved; the rubric is the geometry.
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