2. Suppose the economy is initially at potential output and the quantity of aggregate output supplied increases. What information would you need to determine whether this was due to a movement along the SRAS curve or a shift of the LRAS curve?
You would need to know what happened to the aggregate price level. If the increase in the quantity of aggregate output supplied was due to a movement along the SRAS curve, the aggregate price level would have increased at the same time as the quantity of aggregate output supplied increased. If the increase in the quantity of aggregate output supplied was due to a rightward shift of the LRAS curve, the aggregate price level might not rise. Alternatively, you could make the determination by observing what happened to aggregate output in the long run. If it fell back to its initial level in the long run, then the temporary increase in aggregate output was due to a movement along the SRAS curve. If it stayed at the higher level in the long run, the increase in aggregate output was due to a rightward shift of the LRAS curve.