Which of the following statements represents a correct and sequentially accurate economic explanation?
A) Wage rates rise,SRAS rises,and the SRAS curve shifts to the left.
B) The prices of nonlabor inputs rise,SRAS decreases,and the SRAS curve shifts to the right.
C) Labor productivity rises,SRAS increases,and the SRAS curve shifts to the right.
D) An adverse supply shock hits,SRAS decreases,and the SRAS curve shifts to the right.
E) a and c

Question

Quizplus · Accepted Answer

An increase in labor productivity would lead to an increase in SRAS, which would cause the SRAS curve to shift to the right. This is because an increase in labor productivity leads to a decrease in production costs, thus increasing potential output. A rise in wage rates (option A), a rise in non-labor input prices (option B), and an adverse supply shock (option D) all lead to a decrease in SRAS, causing the SRAS curve to shift to the left. Option E is incorrect because option A contradicts option C.

Which of the Following Statements Represents a Correct and Sequentially