The FE line would be shifted to the right by
A)a decline in the productivity of labor.
B)a decline in the productivity of capital.
C)an increase in the productivity of labor.
D)a decline in the real interest rate.

Question

Quizplus · Accepted Answer

The FE line represents the potential output of an economy given its resources and technology. An increase in the productivity of labor (i.e. the ability to produce more output with the same amount of labor) would allow for an increase in potential output, shifting the FE line to the right.

The FE Line Would Be Shifted to the Right by