Which of the following would be most likely to shift the long-run aggregate supply curve (LRAS) to the right?
A) favorable weather conditions that increased the size of this year's grain harvest
B) an increase in resource prices relative to product prices
C) an increase in labor productivity as the result of improved computer technology and expansion of the Internet
D) an increase in the cost of security as the result of terrorist activities

Question

Quizplus · Accepted Answer

An increase in labor productivity due to improved technology and expansion of the Internet would increase the productive capacity of the economy, leading to a rightward shift in the LRAS curve. Option A, favorable weather conditions, would increase short-run aggregate supply (SRAS) but not LRAS. Option B, an increase in resource prices relative to product prices, would shift the SRAS leftward and not LRAS. Option D, an increase in the cost of security, would increase production costs and shift SRAS leftward, thereby causing a contraction in both short-run and long-run aggregate supply.

Which of the Following Would Be Most Likely to Shift