Consider the basic AD/AS model. Suppose that high- school graduates have better computing skills than did graduates in the past, resulting in an increase in average labour productivity. This change will
A)cause a movement along the AS curve to the right.
B)shift the AD curve to the right.
C)shift the AS curve to the left.
D)shift the AS curve to the right.
E)shift the AD curve to the left.

Question

Quizplus · Accepted Answer

An increase in average labor productivity due to better computing skills of high school graduates will lead to a decrease in production costs and an increase in potential output. This will shift the AS curve to the right, as firms are willing to produce more goods and services at every price level. Therefore, the correct answer is D. The AD curve remains unchanged, as there is no change in the factors that affect aggregate demand, such as consumer spending or government policies.

Consider the Basic AD/AS Model