| Front | Back | | --- | --- | | An economy experiences a permanent increase in its labor force due to immigration. Predict the effect on the LRAS curve and potential output ($Y_p$). |

LRAS curve shifts right.
Potential output ($Y_p$) increases.

| | An economy experiences rapid depletion of its primary natural resources. Predict the effect on the Keynesian AS curve and potential output ($Y_p$). |

Keynesian AS curve shifts left.
Potential output ($Y_p$) decreases.

| | A nation's schools undergo a major reform, permanently raising the literacy and technical skills of the workforce. Predict the effect on the LRAS curve and productivity. |

Productivity increases (higher labor quality).
LRAS curve shifts right.

| | An economy adopts advanced AI-driven logistics systems, reducing waste across all supply chains. Predict the effect on the Keynesian AS curve and production possibilities. |

Production possibilities expand (increased efficiency).
Keynesian AS curve shifts right.

| | What is the fundamental difference in what causes a movement along the LRAS curve versus a shift of the LRAS curve? |

Movements along are caused by changes in the price level (PL).
Shifts are caused by changes in production possibilities.

| | Shifts in the long-run aggregate supply (LRAS) occur when there is a change in the production possibilities of the economy, which represents potential output at full employment. | Shifts in the long-run aggregate supply (LRAS) occur when there is a change in the production possibilities of the economy, which represents potential output at full employment. | | The four main determinants of aggregate supply over the long-run are changes in factors of production, improvements in technology, increases in efficiency, and changes in institutions. | The four main determinants of aggregate supply over the long-run are changes in factors of production, improvements in technology, increases in efficiency, and changes in institutions. | | A country suffers from widespread political instability, leading to weakened legal frameworks and property rights. Predict the effect on the LRAS curve. | Institutional decline reduces production possibilities, shifting the LRAS curve left. | | An economy's capital stock depreciates rapidly because of a lack of net investment. Predict the effect on the Keynesian AS curve. | Decreased quantity of capital reduces production possibilities, shifting the Keynesian AS curve left. | |

Based on this diagram of the LRAS, what change in the economy causes the shift from $LRAS_1$ to $LRAS_3$?

| A decrease in the economy's production possibilities (or factors of production). | |

Based on this Keynesian AS diagram, what does the shift from $AS_1$ to $AS_2$ represent in terms of potential output ($Y_p$)?

| An increase in potential output from $Y_{p1}$ to $Y_{p2}$ (due to expanded production possibilities). | |

Identify two distinct determinants of long-run aggregate supply that could cause the leftward shift shown in this diagram.

Decrease in the quantity/quality of factors of production.
Declines in technology.
Decreases in efficiency.

| | How does an improvement in technology allow an economy to produce more real output without acquiring more resources? | It increases productivity, allowing more output to be produced with the same quantity of inputs. | | If an economy increases its economic 'efficiency' without changing its resource quantity, what is the direct result on output and waste? | It produces more output from the same resources while minimising waste. | | While short-run aggregate supply can fluctuate frequently, it is very uncommon for the long-run aggregate supply (LRAS) of an economy to decrease. | While short-run aggregate supply can fluctuate frequently, it is very uncommon for the long-run aggregate supply (LRAS) of an economy to decrease. | | A government implements a highly effective nationwide worker-training program. Predict the step-by-step effect on the LRAS curve. |

Worker training improves the quality of labor (factor of production).
This increases productivity and expands production possibilities.
The LRAS curve shifts right.

| | A prolonged war results in the destruction of a significant portion of a nation's infrastructure and factories. Predict the step-by-step effect on the Keynesian AS curve. |

War decreases the quantity of capital (factor of production).
This reduces production possibilities.
The Keynesian AS curve shifts left.

| | An increase in the quantity or quality of factors of production shifts both the LRAS and Keynesian AS curves to the right, representing economic growth at full employment. | An increase in the quantity or quality of factors of production shifts both the LRAS and Keynesian AS curves to the right, representing economic growth at full employment. | | Why does a change in institutional priorities (e.g., strengthening property rights) shift the LRAS curve? | It alters the economic environment, directly changing the economy's production possibilities and potential output. | | If an economy experiences a decline in efficiency (e.g., due to increased bureaucracy and red tape), what happens to its potential output ($Y_p$)? | Potential output ($Y_p$) decreases (the LRAS / Keynesian AS curve shifts left). | |

| Y_{p3} | |

| Y_{p2} | |

| Y | |

| Y_{p1} | |

| LRAS_2 | |

| Yp3 | |

| Yp1 | |

| Yp2 | |

| Y | |

| AS3 | |

| AS1 |

1. Introduction to Economics2 subtopics

2. Microeconomics12 subtopics

3. Macroeconomics7 subtopics

4. The Global Economy10 subtopics

IB Economics 3.2.8 Shifts of the as Curve Over the Long-run Flashcards

1. Introduction to Economics2 subtopics

2. Microeconomics12 subtopics

3. Macroeconomics7 subtopics

4. The Global Economy10 subtopics

Flashcards for 3.2.8 Shifts of the AS Curve Over the Long-Run

Flashcards for 3.2.8 Shifts of the AS Curve Over the Long-Run - IB