Which policy is least likely to increase the long-run aggregate supply curve?


Question: Which policy is least likely to increase the long-run aggregate supply curve?

In the context of macroeconomic policy, those that are least likely to increase the long-run aggregate supply (LRAS) are typically policies that do not focus on enhancing the productive capacity of the economy. For example, short-term fiscal policies aimed at stimulating demand, such as temporary tax cuts or increased government spending, may boost the economy in the short run but have little impact on the LRAS. This is because the LRAS is influenced by factors such as technological advancements, increases in human and physical capital, and improvements in efficiency, rather than changes in demand. Policies that could potentially decrease the LRAS include those that lead to a reduction in investment in education or infrastructure, discourage innovation, or create barriers to labor and capital mobility. It's important to note that the LRAS is vertical, indicating that in the long run, an economy's output is determined by its resources and technology, not by the price level.


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