Which of the following causes the aggregate production function to shift up?
A) An increase in physical capital stock
B) A decrease in the productivity of workers
C) An increase in the total efficiency units of labor
D) An improvement in technology

Question

Quizplus · Accepted Answer

An improvement in technology improves productivity and increases the efficiency of factors of production, leading to higher output with the same amount of inputs. This shift up in the aggregate production function is represented by an increase in potential output. A increase in physical capital stock (choice A) will only shift the production function up if there is a corresponding increase in labor and efficiency. A decrease in the productivity of workers (choice B) would shift the production function down. An increase in total efficiency units of labor (choice C) would shift the production function up, but not as much as an improvement in technology.

Which of the Following Causes the Aggregate Production Function to Shift