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Figure: Long-Run Aggregate Supply Curves
-(Figure: Long-Run Aggregate Supply Curves)Which of the following can explain the shift of the long-run aggregate supply curve from A to C in the figure?
A) development of new technology
B) an increase in the nation's factors of production
C) negative supply shock
D) increase in oil supply

Question

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Figure: Long-Run Aggregate Supply Curves 
-(Figure: Long-Run Aggregate Supply Curves)Which of the following can explain the shift of the long-run aggregate supply curve from A to C in the figure?
A) development of new technology 
B) an increase in the nation's factors of production 
C) negative supply shock 
D) increase in oil supply

Quizplus · Accepted Answer

A negative supply shock, such as a natural disaster or a sudden increase in input prices, can cause a decrease in the nation's overall productive capacity, shifting the long-run aggregate supply curve leftward from A to C. The development of new technology or an increase in factors of production would shift the curve to the right and an increase in oil supply would have minimal impact on the long-run aggregate supply curve.

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