What are some factors that could cause an increase in long run aggregate supply?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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There are only two broad categories of things that can increase long run aggregate supply.  Long run aggregate supply can be increased by an increase in the quantity of resources that a country has.  It can also be increased by an improvement in the quality of the resources that a country has.

One thing that can increase aggregate supply in the long run is an increase in the quantity of resources.  If a country experiences a wave of immigration, it has more human resources and can therefore produce more things.  If it discovers new mineral deposits it can produce more things.  These are examples of increases in the quantity of resources.

But aggregate supply can increase in the long run even if there is no rise in the quantity of resources.  This is because resource quality can improve.  For example, if a country improves its educational system and expands it to educate more people, it will have better human resources because the workers will be more educated and able to do more high-value jobs.  If the country’s technological level improves, it will have better machinery and such that will allow it to produce goods more efficiently.

These are the only two types of factors than can increase aggregate supply in the long term.


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