Draw the graph · Macro · Aggregate demand and aggregate supply
A productivity boom
Drag a curve sideways, or use its arrows. A curve you do not move is a curve you are saying stays put. Make each shift clear enough that a reader could see it.
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Aggregate demand stays put. Short-run aggregate supply shifts right. Long-run aggregate supply shifts right.
Potential output depends on resources and technology. Better technology raises the economy's capacity, so LRAS shifts right. Because firms can also produce more today at any price level, SRAS shifts right as well. Spending plans are unchanged, so AD stays put.
Real GDP rises and the price level falls, with potential output higher.
Common mistake. A common error is to shift only SRAS, or to shift AD right because 'the economy grows.' Growth from technology is a supply story and a permanent one, so LRAS must move too.
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Lesson: Aggregate Supply