Which of the following most likely causes a shift of the long-run aggregate supply curve to the right?
A) an increase in the money supply
B) a decrease in tax revenues
C) an increase in crop production due to more rainfall
D) an increase in oil prices due to a fire in a major oil refinery

Question

Quizplus · Accepted Answer

An increase in crop production due to more rainfall would lower input prices for businesses, leading to lower production costs, and therefore shifting the long-run aggregate supply curve to the right. Option A is incorrect as an increase in the money supply would lead to inflation, causing the aggregate supply curve to shift to the left. Option B is incorrect as a decrease in tax revenues would lead to a decrease in government spending or an increase in taxes, which would cause the aggregate supply curve to shift to the left. Option D is incorrect as an increase in oil prices due to a fire in a major oil refinery would increase input costs for businesses, leading to higher production costs, and therefore shifting the long-run aggregate supply curve to the left.

Which of the Following Most Likely Causes a Shift of the Long-Run