Given the aggregate demand curve, what effects will an increase in the supply of a productive resource have on output and price level?
A) Output will increase, but the price level will remain the same.
B) The price level will increase, but output will remain the same.
C) The price level will decrease, and output will increase.
D) The price level will increase, and output will decrease.

Question

Given the aggregate demand curve, what effects will an increase in the supply of a productive resource have on output and price level?  
A) Output will increase, but the price level will remain the same. 
B) The price level will increase, but output will remain the same. 
C) The price level will decrease, and output will increase. 
D) The price level will increase, and output will decrease.

Quizplus · Accepted Answer

An increase in the supply of a productive resource will shift the aggregate supply curve to the right, leading to a lower price level and an increase in output. This is because a greater supply of the resource will result in lower input costs for firms, allowing them to produce more goods and services at a lower cost. Therefore, choice C is the best answer as it correctly identifies that the price level will decrease and output will increase.

Given the Aggregate Demand Curve, What Effects Will an Increase