Long-Run Aggregate Supply (LRAS) Part 1 - Check Your Understanding- Answering the following questions. 1. What happens to the LRAS curve when there is an increase in price level? Explain. 2. What does the LRAS curve imply about the long-run trade-off between inflation and unemployment? Explain. 3. Identify three different reasons the LRAS curve would shift to the right. 4. A change in which of the four components of GDP (consumption, investment, government spending, and net exports), would most likely result in the most economic growth? Explain your reasoning. Part 2 - Put It Together- Use the production possibilities curve (PPC) to answer the questions. Capital Goods 5. Explain why the PPC and LRAS both 80 represent maximum sustainable capacity. 6. Is combination A on this graph likely on this 40 A economy's LRAS curve? Explain. 20 7. Assume that a change in productivity allows this economy to sustainably produce 80 capital 100 200 300 Consumer Goods goods and 300 consumer goods. How can this change be shown using a LRAS curve