Chapter 18, Problem 4MCQ

To determine

The correct option that cause the short-run aggregate supply curve to shift to the left

Answer to Problem 4MCQ

From the available options, the correct option is at productivity.

Explanation of Solution

A decrease in productivity will cause the short-run aggregate supply curve to shift to the left because the price of factor input would rise in the short-run along with high unemployment and inflation which lower the productivity and shift the short-run aggregate supply curve to the left. Therefore, all other options are incorrect as price and unemployment increased when supply curve shift to the left and there would be no effect of wages, cost-of living allowances, and insurance premiums.

Here, the correct option is d (productivity).

Economics Concept Introduction

Introduction: An aggregate supply curve represents the relationship between the price level (aggregated) and the quantity supplied (aggregated) in the economy where aggregate supply is the total quantity which is produced and sell by firms at different prices in the market.