Which of the following would shift the FE line to the right?
A)An adverse supply shock
B)An increase in labor supply
C)A decrease in the capital stock
D)An increase in the future marginal productivity of capital

Question

Quizplus · Accepted Answer

An increase in labor supply would shift the FE line to the right as it would increase the economy's potential output. This is because with more labor, more goods and services can be produced, leading to an increase in the economy's productive capacity. The other options - an adverse supply shock, a decrease in the capital stock, and an increase in the future marginal productivity of capital - would all decrease the economy's potential output and shift the FE line to the left.

Which of the Following Would Shift the FE Line to the Right