Which of the following statements is true?
A) A decrease in wage rates will shift the SRAS curve to the left.
B) An adverse supply shock will shift the SRAS curve to the left.
C) A fall in the prices of nonlabor inputs will shift the SRAS curve to the left.
D) An increase in labor productivity will shift the SRAS curve to the left.
E) c and d

Question

Quizplus · Accepted Answer

An adverse supply shock, such as an increase in oil prices or a natural disaster, will shift the SRAS curve to the left. This is because production costs increase, causing a decrease in aggregate supply at every price level. The other options are incorrect: a decrease in wage rates, a fall in the prices of nonlabor inputs and an increase in labor productivity will shift the SRAS curve to the right, as they all lead to a decrease in production costs and an increase in aggregate supply at every price level.

Which of the Following Statements Is True