Macro Unit 3, Question 20- Shifting LRAS and Economic Growth

The video tutorial explains how an increase in capital stock, such as machinery and tools, leads to a rise in aggregate demand due to lower interest rates and increased investment. This results in more resources for firms, causing both short-run and long-run supply curves to shift right, indicating higher production capacity. The tutorial connects these shifts to the concept of economic growth, similar to the outward shift of the production possibilities curve, highlighting the role of increased resource quantity and quality in achieving previously unattainable production levels.

What does it mean for the long-run aggregate supply to shift to the right?

Describe the concept of economic growth in relation to the production possibilities curve.