What can cause an increase in aggregate supply in the long run?

An increase in aggregate supply in the long run can indeed be attributed to technological advancements and improvements in production efficiency. When technology improves, it allows producers to create goods and services more efficiently, often at a lower cost. This can include anything from the adoption of new machinery and equipment to process innovations that streamline production methods. As businesses become more efficient, they can produce more output at the same cost, shifting the aggregate supply curve to the right, which indicates an increase in the total quantity of goods and services supplied at every price level.

In contrast, higher taxation on businesses can reduce their ability to invest in growth and may lead to a decrease in supply. Increased wages for workers, while beneficial for employees, can lead to higher production costs which might discourage output unless offset by productivity gains. Decreased investment in infrastructure can also stifle long-term growth and efficiency, negatively affecting aggregate supply. Therefore, technological advances are pivotal drivers of long-run aggregate supply increases, highlighting their importance in economic growth and productivity.