Which of the following will most likely cause an increase in the long-run 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 likely cause an increase in the long-run aggregate supply curve by reducing production costs and increasing productivity. A reduction in the general level of prices (choice A) would indicate a shift in the short-run aggregate supply curve and would not necessarily affect the long-run aggregate supply curve. An increase in the general level of prices (choice B) would indicate inflation, which usually leads to a decrease in the long-run aggregate supply curve as firms face higher costs of production. An increase in taxes that makes it more expensive for Americans to import crude oil (choice D) would lead to an increase in the cost of production, which could result in a decrease in the long-run aggregate supply curve.

Which of the Following Will Most Likely Cause an Increase