An economy is employing 2 units of capital, 5 units of raw materials, and 8 units of labor to produce its total output of 640 units. Each unit of capital costs $10; each unit of raw materials, $4; and each
Unit of labor, $3. If the per-unit price of raw materials rises from $4 to $8 and all else remains
Constant, the aggregate
A) supply curve would shift to the left.
B) supply curve would shift to the right.
C) demand curve would shift to the left.
D) demand curve would shift to the right.

Question

Quizplus · Accepted Answer

Since the cost of raw materials has doubled, the cost of production increases, and this will result in a decrease in supply. Therefore, the aggregate supply curve will shift to the left.

An Economy Is Employing 2 Units of Capital, 5 Units