Which of the following would cause a positive aggregate demand shock,but leave the aggregate supply curve unaffected?
A)A free trade agreement between Canada and Europe that leads Canadian businesses to increase investment expenditures.
B)A severe drought lasting for six months that destroys agricultural and forestry production.
C)A medical report confirming that improved health for Canadian workers caused fewer lost days of production.
D)An improvement in the computer literacy of workers.
E)A substantial increase in world oil prices.

Question

Quizplus · Accepted Answer

A free trade agreement between Canada and Europe that leads Canadian businesses to increase investment expenditures would increase demand for goods and services, causing a positive aggregate demand shock. However, it would not affect the aggregate supply curve, as there would be no change in the production capacity of the economy.

Which of the Following Would Cause a Positive Aggregate Demand