The typical movement of the aggregate supply curve resulting from an increase in productivity is that it
A)shifts inward and becomes flatter.
B)shifts inward.
C)shifts outward.
D)becomes flatter.
E)becomes steeper.

Question

Quizplus · Accepted Answer

An increase in productivity means that firms are able to produce more output with the same amount of inputs or the same amount of output with fewer inputs. This leads to a decrease in the cost of production and an increase in potential output. As a result, the aggregate supply curve shifts outward, meaning that at any given price level, the economy can produce a larger quantity of output.

The Typical Movement of the Aggregate Supply Curve Resulting from an Increase