Refer to the figure to answer the following questions

Economics Oct 31, 2020

Refer to the figure to answer the following questions. Price level (P) LRAS, LRAS, SRAS, A E B SAAS AD, AD, Real GDP (Y) Based on the figure, which of the following would cause the long-run equilibrium point to change from point B to point D? The population has aged and there are fewer people in the labor force. Firms and workers expected the price level to rise, The economy experienced an increase in government spending. The economy was in an expansion and has adjusted. The country's overall productivity increased.

Expert Solution

Ans.

In the graph we see when long run equilibrium point change from B to D. SRAS supply decrease and LRAS increases. Where price level decreases and R.GDP rises.

So When R.GDP rises means production rises.

Hence option 5) The country's overall productivity increased. is right answer.

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