Other things equal, an improvement in productivity will
A) increase the equilibrium price level.
B) shift the aggregate supply curve to the left.
C) shift the aggregate supply curve to the right.
D) shift the aggregate demand curve to the left.

Question

Quizplus · Accepted Answer

An improvement in productivity means that firms are able to produce more output with the same amount of inputs or fewer inputs. This leads to a lower cost of production and therefore a shift in the aggregate supply curve to the right. This, in turn, will decrease the price level and increase output.

Other Things Equal, an Improvement in Productivity Will