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A-Level Economics · LRAS shift right (long-run growth) diagram question

LRAS shifts right to LRAS₂ and AD is unchanged. Which point is the NEW macroeconomic equilibrium?

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The answer

Point F. AD crosses LRAS₂ at point F: output rises from 4 to 7 AND the price level falls from 6 to 3. The economy always settles where AD meets AS. LRAS₂ is vertical at Y=7, and AD crosses it at point F — real output 7, price level 3. L sits at the right quantity but the wrong price level: it is not on AD, so it is not an equilibrium.

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