If wages increase 10 percent while worker productivity increases 20 percent,what would we expect the long-run aggregate supply curve to do?
A)shift left (an increase in aggregate supply)
B)shift right (an increase in aggregate supply)
C)shift right (a decrease in aggregate supply)
D)shift left (a decrease in aggregate supply)

Question

Quizplus · Accepted Answer

An increase in worker productivity indicates an increase in the economy's potential output, and hence, a rightward shift in the long-run aggregate supply curve. A 10 percent increase in wages does not affect the potential output in the long run, so it does not affect the position of the long-run aggregate supply curve. Therefore, the answer is B) shift right.

If Wages Increase 10 Percent While Worker Productivity Increases 20