Which of the following will NOT increase the long-run aggregate supply (LRAS)?

• A. A rise in labor productivity due to technological advancement
• B. A temporary decrease in aggregate demand
• C. An increase in the quantity of capital
• D. An improvement in the education and skills of the workforce

Answer: (B)

Verified step by step guidance

1. Understand that the long-run aggregate supply (LRAS) curve represents the economy's potential output when all resources are fully employed, and it is determined by factors that affect productive capacity.
2. Identify factors that shift the LRAS curve to the right (increase LRAS), such as technological advancements, increases in capital stock, and improvements in labor quality (education and skills). These factors enhance the economy's ability to produce goods and services.
3. Recognize that a temporary decrease in aggregate demand affects the short-run equilibrium output and price level but does not change the economy's productive capacity or potential output in the long run.
4. Conclude that only changes that affect the productive capacity (like technological progress, capital accumulation, and workforce improvements) increase LRAS, while demand-side fluctuations do not shift LRAS.
5. Therefore, the option 'A temporary decrease in aggregate demand' will NOT increase the long-run aggregate supply.