Other things equal, an increase in productivity will
A) reduce aggregate supply and increase real output.
B) reduce both the interest rate and the international value of the dollar.
C) increase both aggregate supply and real output.
D) increase net exports, increase investment, and reduce aggregate demand.

Question

Quizplus · Accepted Answer

An increase in productivity will result in an increase in aggregate supply since firms can produce more output with the same amount of inputs. This increase in supply will allow for an increase in real output without putting upward pressure on prices. Therefore, both aggregate supply and real output will increase.

Other Things Equal, an Increase in Productivity Will