According to the extended AD-AS model, the U.S. growth experience is most accurately described as which of the following?

Multiple choice question.

A rightward shift in the short-run aggregate supply (AS) curve and a leftward shift in the long-run aggregate demand (AD) curve

A rightward shift in both the long-run aggregate supply (AS) and aggregate demand (AD) curves

A rightward shift in the long-run aggregate demand (AD) curve and a leftward shift in the short-run aggregate supply (AS) curve

A leftward shift in both the long-run aggregate supply (AS) and aggregate demand (AD) curves

1 answer

To analyze the U.S. growth experience using the extended AD-AS model, we typically consider factors affecting both long-term growth in aggregate supply (AS) and aggregate demand (AD). The U.S. economy has seen growth due to various factors, including technological advancements, increases in productivity, and overall demand-side factors.

In the context of historic U.S. economic growth, the best description would be:

A rightward shift in both the long-run aggregate supply (AS) and aggregate demand (AD) curves.

This is because long-run economic growth is represented by increases in the productive capacity of the economy (shifts in long-run AS) as well as increases in demand for goods and services (shifts in AD).