Question

Suppose that productivity increases as workers' health improves. This increase in productivity will: cause a movement down the short-run aggregate supply curve from right to left. cause a movement up the short-run aggregate supply curve from left to right. shift the short-run aggregate supply curve to the left. shift the short-run aggregate supply curve to the right.

Answer 1

shift the short-run aggregate supply curve to the right.

Step-by-step explanation:

An improvement in the health of workers will lead to a shift in the short-run aggregate supply curve (AS) to the right from AS1 to AS2 (see the attached file).

For example, if we assume that the short run aggregate demand remains constant, a shift in the AS curve to the right will then bring about an increase in real national income (y) moving from y1 to y2, and also a fall in the price level (PL) from PL1 to PL2 making equilibrium (e) to move from e1 to e2 (see the attached file).