What is likely to happen as a result of an outward shift in long-run aggregate supply?

• A. Increased unemployment rates
• B. Increased production potential
• C. Decreased consumer spending
• D. Increased inflation rates

Answer: (B)

An outward shift in long-run aggregate supply indicates an increase in the economy's potential output. This shift usually occurs due to factors such as improvements in technology, increases in the labor force, or enhancements in productivity. As the long-run aggregate supply curve shifts to the right, it suggests that the economy can produce more goods and services without leading to inflationary pressures.

This increased production potential means that the economy is capable of generating higher levels of output at stable price levels. As a result, businesses may invest more, leading to job creation and potentially higher wages, which further sustains economic growth. This expansion of capacity ultimately supports a healthier economy, fostering a sustained increase in production capabilities. Thus, the correct answer highlights the significant impact of this outward shift on the economy's overall capacity for growth.