Question : Which of the following can cause a shift in the aggregate supply curve?
Option 1: Changes in technology
Option 2: Changes in input prices
Option 3: Changes in government regulations
Option 4: All of the above
Correct Answer: All of the above
Solution : The correct answer is (d) All of the above.
A shift in the aggregate supply (AS) curve can be caused by various factors, including changes in technology, changes in input prices, and changes in government regulations. These factors can affect an economy's productive capacity and potential output, leading to shifts in the AS curve.
1. Changes in technology: Technological advancements can increase an economy's productivity and efficiency, leading to an increase in potential output. This shifts the AS curve to the right, indicating a higher level of aggregate supply.
2. Changes in input prices: Changes in the prices of inputs such as labor, raw materials, energy, and capital can impact production costs. If input prices increase, it raises the cost of production and reduces potential output. This shifts the AS curve to the left, indicating a lower level of aggregate supply. Conversely, if input prices decrease, it lowers production costs and increases potential output, shifting the AS curve to the right.
3. Changes in government regulations: Government regulations, such as labor laws, environmental regulations, and taxes, can impact production costs and the ease of doing business. Changes in regulations that increase costs or restrict production can shift the AS curve to the left, reducing potential output.
