A shift to the left of the LRAS Curve represents what?
A. economic stagnation
B. an economic recession
C. economic growth

Long run aggregate supply (LRAS)

The long run aggregate supply curve (LRAS) is determined by all factors of production – size of the workforce, size of capital stock, levels of education and labour productivity.

If there was an increase in investment or growth in the size of the labour force this would shift the LRAS curve to the right.

long-run-economic-growth-LRAS-AD

This is the classical view of long run aggregate supply (LRAS). It states that aggregate supply is not determined by the price level or AD, but is determined by factors of production, – land, labour, capital and labour productivity.

How to know which ones to use?

If showing a change in wage costs or oil prices, I would use a SRAS.

For showing long run economic growth, and an increase in capital stock and investment I would show a shift in LRAS.

Keynesian view of LRAS

LRAS-keynsian-classical

A further complication is that there are different views of the LRAS. The Classical view is an inelastic LRAS. The Keynesian view suggests it is elastic at a point up to inelastic. In a sense, the Keynesian view is a combination of the short run aggregate supply and long run. The Keynesian LRAS shows that there is a point in the economy of spare capacity where firms can use more. There also comes a point where full capacity is reached.

answer; conditional stimulus will trigger a conditioned response;

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