Which of the following might cause the LRAS to shift to the right? A. An increase in the money supply B. An improvement in technology C. A destructive war D. Lower taxes

Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter22: Inflation
Section: Chapter Questions
Problem 19RQ: Identity several parties likely to he helped and hurt by inflation.
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Which of the following might cause the LRAS to shift to the right?

A. An increase in the money supply

B. An improvement in technology

C. A destructive war

D. Lower taxes

Expert Solution
Step 1

When the money supply increases, it leads reduces the interest rate. This in turn reduces the cost of borrowing. Decreasing the cost of borrowing is increases the investment, employment and output. This in turn increases the supply of goods and services and shifts the LRAS curve rightward.

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