Now you want to "improve" the aggregate production function to increase the supply capacity of the economy. That is, you desire to move the vertical LRAS to the right on the AS/AD diagram.
(1) List four initiatives that you would focus upon to get the job done.
Hint: a GOOD ANSWER with identify the component elements of the production function we have discussed, and ADDRESS POLICIES that would "positively" impact the elements.
Let's say your economy is at a less-than-full-employment equilibrium WITH AN UPWARD SLOPING SHO T RUN AGGREGATE SUPPLY CURVE (SRAS). Your LRAS suddenly moves to the right. You want to get back to full employment as quickly as possible.
(2) Defend your use of either monetary policy or fiscal policy to do this.
(3) What might happen to PRICE EXPECTATIONS with the policy case you defend and how may these expectations affect the outcome of your policy initiative?