Question

In: Economics

Which of the following will shift the aggregate supply curve to the right? Instructions: You may...

Which of the following will shift the aggregate supply curve to the right?

Instructions: You may select more than one answer. Click the box with a check mark for correct answers and click to empty the box for the wrong answers.

a substantial increase in the price of oil
a two-fold increase in the manufacturing wages as a result of a law passed by the government
a decrease in business taxes
an increase in the overall productivity in the economy because of a new networking technology

Solutions

Expert Solution

Answer:

The following causes are correct which will shift the aggregate supply curve to the right.

  • a decrease in business taxes
  • an increase in the overall productivity in the economy because of new networking technology

Explanation :

A decrease in business taxes will increase the profit of firms. As a result  suppliers will produce more to earn more profit which helps for the shift of aggregate supply curve to the right. An increase in the overall productivity due to the advancement of techonology will reduce the cost of production which motivates the firms to produce more.

The following are the wrong causes which will not help for shift of the supply curve to the right.

  • a substantial increase in the price of oil.
  • a two-fold increase in the manufacturing wages as a result of a law passed by the government

Explanation

Many suppliers or firms use oil as a raw material for the production of final goods. So oil is used as inputs for final production of goods by many firms. Wages are also considered as the inputs for the final production. When an increase in the prices of inputs then the cost of production will increase which helps in the reduction of production. Finally the aggregate supply curve will shift to left.

Rahul Sunny answered 2 years ago
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