Increases in productivity will
A) cause the price level to rise.
B) impact short-run aggregate supply but not long-run aggregate supply.
C) impact aggregate demand but not aggregate supply.
D) increase long-run aggregate supply.
E) increase the price level and aggregate supply.

Question

Quizplus · Accepted Answer

Increases in productivity will lead to an increase in the potential output of an economy, thus increasing long-run aggregate supply. It will not necessarily affect short-run aggregate supply or aggregate demand, and may or may not cause the price level to rise depending on other factors at play. Therefore, the correct answer is choice D.

Increases in Productivity Will