Which statement describes factors that shift the long-run aggregate supply curve?

• A. Changes in resources, technology, and institutions do not affect LRAS.
• B. Changes in resources, technology, and institutions can shift LRAS.
• C. Increases in money supply shift LRAS.
• D. Changes in aggregate demand shift LRAS.

Answer: (B)

The long-run aggregate supply curve reflects the economy’s capacity to produce goods and services, which depends on the amount and quality of resources, technology, and the institutions that shape incentives and efficiency. When resources increase, technology improves, or institutions become more supportive, the economy’s potential output rises, shifting LRAS to the right. Money supply or changes in aggregate demand don’t alter that capacity: money affects prices and demand in the short run, while LRAS sits at the economy’s production capacity. For this reason, shifts in resources, technology, and institutions are what move the long-run supply curve.