What effect does increasing productivity have on the long-run aggregate supply curve?

Increasing productivity enhances the efficiency and output capabilities of the economy. This improvement means that for the same amount of resources, more goods and services can be produced. When productivity rises, it allows businesses to generate a higher level of output without a proportional increase in the costs of production. As a result, the long-run aggregate supply curve, which represents the total quantity of goods and services that an economy can produce at full employment and potential output, shifts to the right.

This rightward shift indicates an increase in the economy's potential output, reflecting a higher level of economic activity that can be sustained over the long term. Higher productivity leads to more efficient use of resources, innovation, and potentially lower prices for consumers in the long run, fostering overall economic growth. Such shifts are vital for understanding how economies can grow and adapt to changes over time.