Question

How is long-term growth illustrated in an AD/AS model?

Short answer

This is illustrated below:

Step-by-step solution

Step 1. Introduction

The long-term growth of the economy in the AD/AS model is depicted by a shift towards the right on the AS curve. Surprisingly the potential GDP line shifts towards the right over a period of time that is vertical, as given in the graph below:

Step 2. Explanation

In the above graph. The potential GDP shifts in the long run (LR) from LRAS0 to LRAS1 to LRAS2 because equilibrium price shifts from E0 to E1 to E2 towards the right, corresponding to the price and real GDP.