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 price level.

Question

Quizplus · Accepted Answer

An improvement in productivity means that firms can produce more output using the same amount of inputs or produce the same output using fewer inputs. This will lead to a decrease in production costs and an increase in the profitability of firms. As a result, firms will increase their supply of goods and services at every price level, leading to a rightward shift in the aggregate supply curve. This will result in lower prices and higher output in the long run.

Other Things Equal, an Improvement in Productivity Will