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What happens when AD moves past the LRAS curve? What other policy works once the economy...

What happens when AD moves past the LRAS curve? What other policy works once the economy reaches full employment?
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Ans: Long run aggregate supply curve shows the maximum output a country can produce with the given level of employment. LRAS also shows the full employment level of the economy. When aggregate demand exceeds the LRAS curve then, it simply means that there is a deficit of output produced as compared to what is demanded in the economy. This shortage results in an increase in the price of available output, thus, shifting back of the AD curve to the equilibrium level.

When an economy reaches full employment with given output and price, the only policy which can sustain such growth is the development of the technological base of the economy. Also, an increase in the available natural resources will push the growth further.

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