Which of the following could lead to a decline in aggregate supply?
A)The discovery of new mineral deposits in Arizona
B)Higher real wage rates in the U.S.
C)Lower personal income in France
D)Cutbacks in government borrowing
E)Rapid depreciation of the Swiss franc

Question

Quizplus · Accepted Answer

Higher real wage rates in the U.S. would increase the cost of production for firms, leading to a leftward shift in the short-run aggregate supply curve and a decrease in aggregate supply.

Answer: C 
 Lower personal income in France would decrease consumer spending, leading to a leftward shift in the aggregate demand curve and a decrease in aggregate supply in the long run.

Answer: E 
 Rapid depreciation of the Swiss franc would make imports more expensive and decrease the competitiveness of Swiss exports, leading to a leftward shift in the short-run aggregate supply curve and a decrease in aggregate supply.

Which of the Following Could Lead to a Decline in Aggregate