What might induce a rightward shift of aggregate supply?
a) Improvements in productivity, resulting from increased investment in plant and equipment
b) Increases in the size of labor force which reduce wages, improved business confidence and changes in tax policies and government regulation which favorably impact businesses
c) a and b
c) a and b
To determine the factors that can induce a rightward shift in aggregate supply, we need to understand what aggregate supply represents. Aggregate supply refers to the total output of goods and services produced by all firms in an economy.
Improvements in productivity, resulting from increased investment in plant and equipment, can lead to a rightward shift in aggregate supply. When firms invest in better machinery, technology, and equipment, they can produce more output using the same amount of resources. This leads to an increase in productivity, resulting in a larger supply of goods and services.
Increases in the size of the labor force can also induce a rightward shift in aggregate supply. When the labor force grows, there are more workers available to produce goods and services. This increase in labor supply can lead to higher production levels and a larger aggregate supply.
Additionally, other factors such as improved business confidence and changes in tax policies and government regulations can also favorably impact businesses, leading to a rightward shift in aggregate supply. When businesses have more confidence in the economy, they may be more willing to invest in expanding their production capabilities. Similarly, changes in tax policies and government regulations that are business-friendly can incentivize firms to increase their output.
Therefore, both improvements in productivity resulting from increased investment in plant and equipment (a) and increases in the size of the labor force which reduce wages, improved business confidence, and changes in tax policies and government regulation which favorably impact businesses (b) can induce a rightward shift in aggregate supply.