In the AD-AS model, the leftward shift in the aggregate supply curve may be due to ( ).A.Otherwise unchanged and monetary wage increase.B.All other things being equal, the price of raw materials has risen.C.Other things being equal, labour productivity declines.D.All of the above are possible.
Question
In the AD-AS model, the leftward shift in the aggregate supply curve may be due to ( ).A.Otherwise unchanged and monetary wage increase.B.All other things being equal, the price of raw materials has risen.C.Other things being equal, labour productivity declines.D.All of the above are possible.
Solution
D. All of the above are possible.
Here's why:
A. A monetary wage increase, all other things being equal, would increase the cost of production for businesses. This would cause the aggregate supply curve to shift to the left, indicating a decrease in the total output of goods and services at every price level.
B. Similarly, if the price of raw materials rises, the cost of production for businesses also increases. This would also cause the aggregate supply curve to shift to the left.
C. If labour productivity declines, it means that workers are producing less output for each hour of work. This would increase the cost of production (since more hours of work are needed to produce the same amount of output), causing the aggregate supply curve to shift to the left.
So, all of the above scenarios (A, B, and C) would cause a leftward shift in the aggregate supply curve in the AD-AS model.
Similar Questions
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