12. Explain whether each of the following events would cause a movement along or a shift in...
Question:
12. Explain whether each of the following events would cause a movement along or a shift in the position of the LRAS curve, other things being equal. In each case, explain the direction of the movement along the curve or shift in its position.
a. An increase in the capital stock causes real planned production to rise at any given price level, so the LRAS curve shifts rightward.
b. An increase in the quantity of money causes the aggregate demand to shift rightward, which generates a movement upward along the LRAS curve.
c. This reduction in the capital stock, which also will lead to higher energy prices, causes real planned production to decline at any given price level, so the LRAS curve shifts leftward.
d. When the price level rises with inflation, there is a movement of the AD curve upward along the LRAS curve. (10 Points)