5. Effects of Long-run Supply Side Policies seen through Graphs

Effects of Long-run Supply Side Policies seen through Graphs

1. Shifting outwards of the PPC Curve

The PPC curve will shift outwards as productive capacity increases.

2. Shifting rightwards of the AS curve in the AD-AS model

The long-run aggregate supply will shift from LRAS1 to LRAS2 and this will increase the full-employment output level. Coupled with an increase in aggregate demand, the real national output will increase from Y1 to Y2.