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In the AD/AS diagram, how is long-run economic growth due to rising productivity illustrated over time?
AA gradual leftward shift of aggregate demand
BA one-time jump in prices with no output change
CA gradual rightward shift of aggregate supply
DA permanent shortage across every single market
Answer & Solution
Correct answer: C. A gradual rightward shift of aggregate supply
1. Productivity growth is a supply-side phenomenon, so it works through the aggregate supply curve.
2. As productivity rises year after year, the AS curve and the vertical potential GDP line both drift gradually to the right.
3. This lets the economy sustainably produce more real GDP over time.
4. Option A names the wrong curve, since growth is not driven by a demand-side shift.
_Source: OpenStax Principles of Macroeconomics for AP Courses (CC BY 4.0), Ch 10 "The Aggregate Demand/Aggregate Supply Model", section 10.5 | How the AD/AS Model Incorporates Growth, Unemployment, and Inflation_
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