A technological advancement that increases the productivity of an input will lead to:
A)a leftward shift in the short-run aggregate supply curve and a rightward shift in the long-run aggregate supply curve.
B)a rightward shift in the short-run aggregate supply curve and a leftward shift in the long-run aggregate supply curve.
C)a leftward shift in the short-run aggregate supply curve, but no shift in the long-run aggregate supply curve.
D)a change in the slope of the short-run aggregate supply curve and a rightward shift in the long-run aggregate supply curve.
E)a rightward shift in both the short-run aggregate supply curve and the long-run aggregate supply curve.

Question

A technological advancement that increases the productivity of an input will lead to:​
A)a leftward shift in the short-run aggregate supply curve and a rightward shift in the long-run aggregate supply curve.
B)a rightward shift in the short-run aggregate supply curve and a leftward shift in the long-run aggregate supply curve.
C)a leftward shift in the short-run aggregate supply curve, but no shift in the long-run aggregate supply curve.
D)a change in the slope of the short-run aggregate supply curve and a rightward shift in the long-run aggregate supply curve.
E)a rightward shift in both the short-run aggregate supply curve and the long-run aggregate supply curve.

Quizplus · Accepted Answer

An increase in productivity due to technological advancement will reduce the cost of production of goods and services, leading to an increase in aggregate supply. In the short run, firms will increase their output due to the lower cost of production, resulting in a rightward shift in the short-run aggregate supply curve. In the long run, firms will adapt to the new technology, and capital and labor will adjust, leading to a higher potential output level and a rightward shift in the long-run aggregate supply curve. Therefore, the correct answer is E, a rightward shift in both the short-run and long-run aggregate supply curves.

A Technological Advancement That Increases the Productivity of an Input