Assume an economy experiences an increase in productivity that occurs as a result of a more widespread implementation of a major technological breakthrough.Given this information,we would expect which of the following to occur?
A)aggregate demand would not change
B)aggregate demand would shift to the right
C)aggregate demand would shift to the left
D)both the aggregate demand and aggregate supply curves would shift to the left

Question

Quizplus · Accepted Answer

An increase in productivity as a result of a major technological breakthrough is likely to shift the aggregate supply curve to the right, indicating an increase in the potential output of the economy at each price level. As a result, the economy would be able to produce more goods and services, which would lead to a higher level of real GDP and a lower price level. This increase in potential output would also lead to an increase in aggregate demand, as consumers and firms would want to purchase more output at each price level. Therefore, we would expect the aggregate demand curve to shift to the right as well.

Assume an Economy Experiences an Increase in Productivity That Occurs