Consider the basic AD/AS model.Suppose that high-school graduates have better computing skills than did graduates in the past,resulting in an increase in average labour productivity.This change will
A)shift the AS curve to the left.
B)shift the AS curve to the right.
C)shift the AD curve to the left.
D)shift the AD curve to the right.
E)cause a movement along the AS curve to the right.

Question

Quizplus · Accepted Answer

An increase in average labour productivity due to better computing skills will shift the AS curve to the right, as firms are now able to produce more output at each price level. This leads to lower costs of production and a lower price level. There is no reason for the change to affect the AD curve.

Consider the Basic AD/AS Model