Improvement in Technology and Curve Shifting in CFA Level 1 Exam

Shift of Curves Due to Technological Advancements

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Question

An improvement in technology would shift which of the following curves?

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Explanations

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A. B. C. D. E.

B

Improvements in technology permit the economy to squeeze a larger output from a specific resource supply. Thus, such improvements enhance productivity and thereby shift the LRAS curve to the right.Before such technology shifts the long run aggregate supply however, the short run aggregate supply is affected. Thus, both the SRAS and LRAS curves shift outward under a technology improvement.

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