'The graph shows the aggregate demand (AD) curve and the long-run aggregate supply (LRAS) curve for a hypothetical economy. Suppose that the economy observes an increase in the human capital of workers, causing productivity to rise_ Show the effect of this change by shifting one of the curves in the graph LRAS How will this change affect the rate of inflation? Inflation will fall. Inflation will rise_ Inflation will be unchanged. How will this change affect the growth rate? Real GDP growth rate The growth rate will decrease. The growth rate will increase The growth rate will be unchanged'
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Step 1: An increase in human capital of workers leads to a rise in productivity, which shifts the long-run aggregate supply (LRAS) curve to the right. Show more…
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