Question

The short-run aggregate supply curve will shift to the:

a- right if commodity prices increase.

b- left if productivity increases.

c- right if nominal wages decrease.

d- right if government spending decreases.

Answer 1

A shift in the short-run aggregate supply (SRAS) curve to the right will result in a greater real GDP and downward pressure on the price level, if aggregate demand remains unchanged. Productivity increasing will shift the SRAS curve to the right.

Step-by-step explanation:

A shift in the short-run aggregate supply (SRAS) curve to the right will result in a greater real GDP and downward pressure on the price level, if aggregate demand remains unchanged.

Out of the given options:

• Commodity prices increasing will not shift the SRAS curve to the right, but it may affect the price level.
• Productivity increasing will shift the SRAS curve to the right, as it leads to more output being produced at the same price level.
• Nominal wages decreasing will shift the SRAS curve to the right, as it lowers production costs and allows firms to produce more at the same price level.
• Government spending decreasing will not directly shift the SRAS curve but may affect aggregate demand, which can indirectly impact the SRAS curve.

The correct answer is b- left if productivity increases.