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If, in a diagram, LRAS shifts to the right, will LRPC shifts to the left accordingly? Explain the result

Economics Dec 08, 2020

If, in a diagram, LRAS shifts to the right, will LRPC shifts to the left accordingly? Explain the result.

Expert Solution

The relation between price level and the quantity of products is represented by the aggregate supply curve. In the long-run, this curve is vertical. Any rightward shift in aggregate supply curve and assuming the demand at the same level would create excess supply in economy. This would result in reducing cost of manufacturing products. In the short-run, the aggregate supply curve would shift rightwards. Meanwhile, shifting LRPC to the left is representing a lower unemployment in the economy. Lowering unemployment is an indicator of increasing short run supply and the economic output level.

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