Question

In: Economics

Which statement is correct about a shift in the aggregate supply curve to the right and productivity growth?


Which statement is correct about a shift in the aggregate supply curve to the right and productivity growth? Assume that aggregate demand remains unchanged. Select the best answer 

When the SRAS curve shifts to the right, at every price level, producers supply a lower quantity of real GDP. 

A higher level of productivity shifts the aggregate supply curve to the right. 

Real growth in GDP per capita is always faster than productivity growth

Solutions

Expert Solution

A higher level of productivity shifts the aggregate supply curve to the right.

Explanation :

A higher level of productivity shifts the aggregate supply curve to the right assuming aggregate demand remains unchanged. This is because, as productivity increases firm's are able to produce more goods and services thus increasing the overall output produced by the firm at a given level of price. With the greater amount of output produced, thus firms are able to supply more of their produce. Thus causing a shift in the aggregate supply curve to the right.

Rahul Sunny answered 2 years ago
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