Which statement describes a factor that does not shift LRAS?

• A. Increases in population
• B. Advances in technology
• C. Larger capital stock
• D. A temporary fiscal stimulus increasing aggregate demand

Answer: (D)

The main idea is that long-run aggregate supply reflects the economy’s productive capacity—how much it can produce given its resources and technology. Factors that change the quantity or quality of resources or how productive those resources are shift LRAS. A growing population increases the labor supply, which raises potential output and shifts LRAS to the right. Advances in technology boost productivity, allowing more output from the same inputs, so LRAS shifts right. A larger capital stock adds more machinery and structures for production, also shifting LRAS to the right.

A temporary fiscal stimulus that increases aggregate demand, on the other hand, changes demand in the short run but does not permanently alter the economy’s capacity. It can raise or accelerate output in the short run, but once the stimulus ends, the economy tends to return to its potential level of output, with LRAS unchanged. That’s why a temporary demand boost does not shift the long-run aggregate supply curve.