Consider the following news headline: "Information technology costs for Canadian firms continue to drop." Choose the statement below that best describes the likely macroeconomic effect.
A)the AS curve shifts to the right; the price level falls and real GDP rises
B)the AS curve shifts to the left; the price level rises and real GDP falls
C)the AD curve shifts to the right; the price level rises and real GDP rises
D)the AD curve shifts to the left; the price level falls and real GDP falls
E)the AD and AS curves both shift to the right; the effect on the price level is indeterminate and real GDP rises

Question

Quizplus · Accepted Answer

The decrease in IT costs for Canadian firms will likely lead to an increase in productivity, which will shift the AS curve to the right. This will result in a decrease in the price level and an increase in real GDP.

Consider the Following News Headline: "Information Technology Costs for Canadian