Question

The LRAS represents the production possibility frontier. Group of answer choices True False

Answer 1

Above statement is True. Because, there is a link between macroeconomics and the long-run aggregate supply curve. If the PPF curve shifts to the right, then it is similar effect to the LRAS shifting to the rightThe aggregate supply curve shows the amount of goods that can be produced at different price levels.When the economy reaches its level of full capacity (full employment – when the economy is on the production possibility frontier) the aggregate supply curve becomes inelastic because, even at higher prices, firms cannot produce more in the short term.The aggregate supply curve is related to a production possibility frontier (PPF). Both show the productive capacity of an economy.