Supply-Side Policy (LRAS Right)

AD/AS Model · Macro
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SRAS₁ SRAS₂ LRAS₁ LRAS₂ AD
Supply-side policy raises productive capacity: LRAS₁ → LRAS₂ and SRAS₁ → SRAS₂. Real output rises Y₁ → Y₂ and the price level falls PL₁ → PL₂, so growth comes without inflationary pressure.