Which of the following will increase the short-run aggregate supply?
A) An increase in wages
B) A decrease in the price of capital
C) An increase in government spending on education
D) An increase in consumption spending

Question

Quizplus · Accepted Answer

A decrease in the price of capital will increase the productivity of firms, allowing them to produce more output with the same amount of inputs, thus increasing short-run aggregate supply. An increase in wages (choice A) will lead to higher production costs, decreasing short-run aggregate supply. An increase in government spending on education (choice C) and an increase in consumption spending (choice D) may have long-run effects on aggregate supply, but they will not have an immediate impact on short-run aggregate supply.

Which of the Following Will Increase the Short-Run Aggregate Supply