Which of the following factors would be most likely to lead to a decrease in aggregate supply?

Question

BlackTom AI · Accepted Answer

Aggregate supply decreases when production costs or barriers to production rise so that firms supply less output at every price level.

1) Relevant knowledge points and concepts
- Aggregate supply (AS) is the total quantity of goods and services firms in an economy are willing and able to produce at different price levels.  
- A leftward shift (decrease) in AS occurs when production becomes more costly or capacity is reduced; a rightward shift (increase) occurs when costs fall or productive capacity rises.  
- Factors that affect AS include input costs, taxes/subsidies, technology, labour supply, and productivity.

2) Step‑by‑step reasoning
- Option c: An increase in the rate of taxation on firms raises firms’ per‑unit cost (or reduces after‑tax profits). Higher taxes make production less attractive at any given price, so firms reduce the quantity supplied. That is a leftward shift (decrease) in aggregate supply.
- Mechanism chain: tax ↑ → marginal/average cost of production ↑ and/or net profit per unit ↓ → firms reduce output at each price → AS shifts left.

3) Calculations / intermediate steps
- No numerical calculation is needed; this is comparative statics. The logical intermediate steps are: increase in firm taxes → higher production costs or lower retained earnings → lower supply at every price level → AS decreases.

4) Why the correct answer is correct
- Increasing taxes on firms directly raises the cost of supplying goods (or reduces net returns), reducing firms’ willingness/ability to produce at existing prices. This reduces aggregate supply (shift left), matching the definition of a decrease in AS.

5) Why the other options are incorrect
- a. Lower costs of production due to new technology reduce costs and increase AS (rightward shift), not decrease it.  
- b. An increase in labour force participation raises available labour and capacity, increasing AS (rightward shift).  
- d. Higher labour productivity increases output per worker, raising AS (rightward shift).

6) Conclusion
- Therefore the factor most likely to lead to a decrease in aggregate supply is c. An increase in the rate of taxation that firms are required to pay. This matches the provided answer.

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Which of the following factors would be most likely to lead to a decrease in aggregate supply?单项选择题

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更多留学生实用工具

希望你的学习变得更简单

In response to a positive one-time oil price shock, the U.S. economy would initially experience a . Next, as soon as the oil price shock ends, it would by way of __.