Which of the following will most likely cause an increase in the aggregate supply curve?
A) a reduction in the general level of prices
B) an increase in the general level of prices
C) an improvement in technology that substantially reduces the cost of generating energy
D) an increase in taxes that makes it more expensive for Americans to import crude oil

Question

Quizplus · Accepted Answer

An improvement in technology that substantially reduces the cost of generating energy will decrease the cost of production and increase the productivity of the economy, thus causing an increase in the aggregate supply curve. A reduction in the general level of prices (option A) may signal a decrease in aggregate demand, which can contract the aggregate supply curve in the short run. Option B, an increase in the general level of prices, will contract the aggregate supply curve. Option D, an increase in taxes that makes it more expensive for Americans to import crude oil, will increase the cost of production and reduce the supply, hence contract the aggregate supply curve.

Which of the Following Will Most Likely Cause an Increase