Question

Other things equal, an improvement in productivity will a. shift the aggregate demand curve to the left. b. shift the aggregate supply curve to the left. c. shift the aggregate supply curve to the right. d. increase the equilibrium price level.

Answer 1

Based on economic theory, other things being equal, a productivity improvement will "shift the aggregate supply curve to the right."

This is because a shift in the aggregate supply curve to the right means an increase in the quantity supply.

Usually, when the shift in the aggregate supply curve moves to the right, the result effects that usually occurs include the following:

• Lower inflation rate,
• Higher production rate,
• Decrease in the unemployment rate.

Hence, in this case, it is concluded that that the correct answer is option C. "shift the aggregate supply curve to the right."

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