Consider the basic AD/AS model. Suppose that a rising percentage of high- school graduates are illiterate, resulting in a decrease in average labour productivity. This change will
A)shift the AD curve to the right.
B)shift the AS curve to the right.
C)shift the AS curve to the left.
D)shift the AD curve to the left.
E)cause a movement to the right along the AS curve.

Question

Quizplus · Accepted Answer

A decrease in average labor productivity will lead to a decrease in the supply of goods and services, causing a leftward shift in the AS curve. This will result in higher prices and lower output in the short run. The AD curve will remain unchanged.

Consider the Basic AD/AS Model