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Hello everyone.
00:01
So in this question, various scenarios have been given and we need to find out whether the lras, that is long -run aggregate supply curve, will shift left or to die.
00:11
So firstly, what is lars, that is long -run aggregate supply? so long -run aggregate supply curve states the relationship between the price level and output.
00:51
Now, the long -run aggregate supply curve states the relationship between the price level and output.
00:53
Aggregate supply curve is perfectly vertical.
00:56
Now we'll find out, figure out with the given scenarios whether the lras will shift to the right or to the left.
01:04
Firstly we'll see that in first case when a tsunami destroying much of the existing stock of the capital in japan.
01:13
So in this case lras will shift to shift to the left.
01:29
Now the reason behind this is that a decline in capital stock results in fall in the output potential.
01:39
Moving to the next, that is the internet revolution of 1990s.
01:45
In this case, lras will shift to the right.
01:54
Reason behind this is that the internet revolution resulted in an increase in the potential output.
02:00
That's why it will shift to the right.
02:03
Now the third case is that significant and sustained increase in the income tax rates...