Suppose an economy experiences an increase in productivity.The AD curve will most likely shift to the right when this increase in productivity is the result of which of the following?
A)a major technological breakthrough
B)a reorganization of production designed to reduce costs with existing technology
C)an increase in human capital
D)government subsidies for higher education
E)none of the above

Question

Quizplus · Accepted Answer

A major technological breakthrough would result in increased productivity and therefore shift the AD curve to the right as it would increase potential output and increase economic growth. The other options may also lead to increased productivity, but they are unlikely to have as large an impact on potential output and economic growth as a technological breakthrough.

Suppose an Economy Experiences an Increase in Productivity