Increase in retirement age shifts LRAS rightward

Steps:

• Current equilibrium at X: AD intersects LRAS at full-employment output.
• Raising retirement age extends working years, boosting labor supply.
• Larger labor supply raises potential output, shifting LRAS right.
• New equilibrium occurs where AD meets shifted LRAS, at higher output.

Why C is correct:

• C lies on the new rightward-shifted LRAS, reflecting expanded long-run potential output per the aggregate supply model.

Why the others are wrong:

• A: Shows reduced output, implying leftward LRAS shift from labor contraction.
• B: Indicates higher prices with unchanged output, typical of leftward AD shift.
• D: Depicts lower output and prices, consistent with rightward AD shift, not LRAS.

Final answer: C