Shifts of the LRAS or Keynesian AS Curve

This topic explains how the long-run aggregate supply (LRAS) or the Keynesian aggregate supply (AS) curve can shift to the right, representing increases in an economy’s potential output. It compares the monetarist/new classical view — where LRAS is vertical and independent of the price level — with the Keynesian view of a three-section AS curve and lists the supply-side factors (changes in factor quantities/quality, technology, efficiency, and institutions) that expand productive capacity. Understanding these shifts is important for analysing long-term growth, inflationary and deflationary gaps, and supply-side policy effects.