Philotechnia requires every high school graduate to be computer literate because so many workplaces are using different forms of information technologies. How is the aggregate demand–aggregate supply model affected? Demonstrate the effect by shifting the appropriate curve or curves.

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Explanation:

The computer literacy policy will increase labor supply, which will increase potential GDP (shifting LRAS curve rightward to LRAS1) and will increase aggregate supply in short run, too (shifting SRAS curve rightward to SRAS1). New equilibrium is at point X where aggregate demand (AD) intersects LRAS1 and SRAS1 curves.

When workers are able to use computers more efficiently, productivity increases. The production side of the economy, which is represented by the aggregate supply curves, is affected. In particular, the short‑run aggregate supply curve shifts to the right (outward away from the vertical axis and towards the horizontal axis). This increase in knowledge builds workers' human capital, which also means that the long‑run benefits by this increase in knowledge. The long‑run aggregate supply curve shifts to the right (outward away from the vertical axis).

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