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What is LRAS?
It represents the potential capacity of an economy’s factors of production
maximum sustainable output an economy can produce when all resources (labor, capital, technology) are fully employed.
What shifts the LRAS?
Any change in the quantity or quality of a factor of production.
What does an outward shift of the LRAS represent?
An increase in the productive capacity.
What determinants may shift the LRAS outward (right)?
Technological advances
Increase in education and skills