An increase in productivity will
A) increase aggregate demand.
B) increase aggregate supply.
C) increase aggregate supply and aggregate demand.
D) decrease aggregate supply and aggregate demand.

Question

Quizplus · Accepted Answer

An increase in productivity will lead to an increase in the supply of goods and services, which will shift the aggregate supply curve to the right. This will increase the output of the economy and lower the price level. However, it will not necessarily increase aggregate demand, as that depends on other factors such as consumer spending, investment, and government spending.

An Increase in Productivity Will