The economy's AS curve will shift upward in the short run if there is:
A)an improvement in technology.
B)a decrease in labour productivity.
C)a decrease in the wage rate.
D)a decrease in the price level.
E)a decrease in the cost of capital.

Question

Quizplus · Accepted Answer

If there is a decrease in labour productivity, it means that firms need more units of labour to produce the same amount of output, which increases their costs of production. This will lead to a decrease in short-run aggregate supply (AS) and a shift upward of the AS curve.

The Economy's AS Curve Will Shift Upward in the Short