Which of the following could lead to a decline in aggregate supply in the U.S.?
A) The discovery of new mineral deposits in Arizona
B) Higher real wage rates in the U.S.
C) Lower personal income in France
D) Cutbacks in government borrowing
E) Rapid depreciation of the Swiss franc

Question

Quizplus · Accepted Answer

Higher real wage rates in the U.S. would lead to higher production costs for firms, which would, in turn, decrease aggregate supply.

Answer: D 
 Cutbacks in government borrowing would reduce government spending, which would reduce demand for goods and services and decrease aggregate supply.

Answer: E 
 Rapid depreciation of the Swiss franc would make imports from Switzerland cheaper for U.S. consumers, which would increase demand for Swiss goods and decrease demand for U.S. goods, ultimately decreasing aggregate supply in the U.S.

Which of the Following Could Lead to a Decline in Aggregate