The discovery and dissemination of a new cost-saving technology
A) is an example of a positive demand shock
B) would cause the long-run AS curve to shift leftward,thereby increasing both output and the price level
C) would increase firms' unit costs
D) would lead to an increase in output and a decrease in the price level
E) is an example of a negative supply shock

Question

Quizplus · Accepted Answer

The discovery and dissemination of a new cost-saving technology would lead to a decrease in firms' costs of production, causing an increase in output and a decrease in the price level in the short run, as shown by the movement down along the AD curve. However, in the long run, the AS curve would shift rightward, resulting in an increase in output and a decrease in the price level. This is because the cost savings from the new technology would encourage firms to increase production, leading to an increase in real GDP and a decrease in the price level. Therefore, the correct answer is D.

The Discovery and Dissemination of a New Cost-Saving Technology