Question

Which of the following events would cause a leftward shift of the LRAS​, other things being​ equal?
A.
The nation’s capital stock is higher than it was last year.
B.
Government spending has decreased.
C.
There has been an 8 percent increase in the quantity of money in circulation.
D.
Upper A hurricane of unprecedented strength has damaged oil rigs comma factories comma and ports all along the nation’s coast.

Answer 1

Option D

An LRAS depicts the potential level of output and that is produced using all the available resources in the economy. It changes if the resources change. A higher capital stock shifts it to right and damage to the resources like oil, port, factories shifts it to left as it decreases.

The increase in spending increases consumption and investment in the economy and shifts aggregate demand to the right.

An increase in the money circulation increases AD and shifts AD to right.