Which statement is correct?
A) An improvement in technology shifts the long-run aggregate supply curve to the right.
B) A decrease in inflationary expectations shifts the short-run aggregate supply curve to the left.
C) As business expectations decline, the short-run aggregate supply curve shifts to the right.
D) A decrease in subsidies to business firms shift the short-run aggregate supply curve to the right.

Question

Quizplus · Accepted Answer

An improvement in technology leads to an increase in productivity and output, which shifts the long-run aggregate supply curve to the right. Option B is incorrect because a decrease in inflationary expectations would shift the SRAS curve to the right, not left. Option C is incorrect because a decline in business expectations would lower output and shift the SRAS curve to the left. Option D is incorrect because a decrease in subsidies to business firms would increase their costs and lower output, shifting the SRAS curve to the left.

Which Statement Is Correct