Suppose that an economy produces 2,400 units of output, employing the 60 units of input, and the price of the input is $30 per unit.All else equal, if the price of each unit of input decreased from $30 to $20, then productivity would
A)increase from $40 to $90 and aggregate supply would decrease.
B)increase from $50 to $60 and aggregate supply would decrease.
C)increase from $60 to $70 and aggregate supply would increase.
D)remain unchanged but aggregate supply would increase.

Question

Quizplus · Accepted Answer

Productivity, defined as output per unit of input, remains unchanged at 40 (2400/60) because the output and input quantity remain the same. However, the decrease in input cost increases aggregate supply as production becomes cheaper.

Suppose That an Economy Produces 2,400 Units of Output, Employing