Answer to Question #112183 in Macroeconomics for zukile

Question

If AS curve shifts to the left as productivity decreases, it will result in a combination of...
1.Lower output, higher unemployment, and higher inflation.
2.Lower output, lower unemployment and lower inflation.
3.Higher output, lower unemployment and lower inflation
4.Higher output, higher unemployment and higher inflation

Answer 1

The answer is: 1). Lower output, higher unemployment, and higher inflation.  

When the aggregate supply curve shifts to the left, the equilibrium real output decreases and the equilibrium price level in the economy rises. The decrease in the equilibrium real output increases the level of unemployment in the economy as the workers are laid off.