c A major improvement in technology: The SRAS curve shifts downward and the LAB curve outward, resulting in higher real income and a lower price level. (1 A reduction in net exports: The AD curve shifts to the left, lowering real income and the price level. 4.How would an increase in the supply of labor affect the natural level of employment and potential output? It would increase both the employment and potential output. How would it affect the real wage, the level of real GDP, and the price level in the short run? It will lower the real wage, increase real output, and lower the price levels. How would it affect long-run aggregate supply? The LRAS would shift to the right. What kind of gaps would be created? It would cause a recessionary gap between actual output and potential output