A technological advance leads to a shift in
A) only short-run aggregate supply.
B) only long-run aggregate supply.
C) neither short-run nor long-run aggregate supply.
D) both short-run and long-run aggregate supply.
E) only aggregate demand.

Question

Quizplus · Accepted Answer

A technological advance affects both short-run and long-run aggregate supply. In the short run, the technological advance increases productivity and reduces production costs, shifting the short-run aggregate supply curve to the right. In the long run, firms can adjust their inputs and production processes to fully take advantage of the technological advance, leading to a shift in the long-run aggregate supply curve to the right as well.

A Technological Advance Leads to a Shift in