Long-Run Aggregate Supply (LRAS) Practice Test

A student claims that when the price level rises, firms will produce more in the long run, so LRAS should slope upward. Based on the LRAS curve shown and long-run assumptions, which statement best refutes the claim?

An economy experiences a sustained increase in the physical capital stock due to higher long-run investment in machinery and infrastructure. Based on the LRAS curve shown, which change best describes the long-run effect?

Assume long-run flexible prices and that the investment increases the quantity of productive resources.