A country's long-run aggregate supply curve will shift to the left when there is (are)
A) fewer regulatory impediments to business.
B) a discovery of new oil reserves in that country.
C) a reduction in the labor force.
D) a reduction in the money supply.

Question

Quizplus · Accepted Answer

A reduction in the labor force means there are fewer workers available to produce goods and services, which decreases the productive capacity of the economy and shifts the long-run aggregate supply curve to the left. Option A is incorrect because fewer regulatory impediments would likely increase the economy's productive capacity and shift the curve to the right. Option B is incorrect because the discovery of new oil reserves would likely increase the economy's productive capacity and shift the curve to the right. Option D is incorrect because a reduction in the money supply would affect short-run aggregate supply, not long-run aggregate supply.

A Country's Long-Run Aggregate Supply Curve Will Shift to the Left