Question

Assume that the position of a nation's aggregate demand curve has not changed, but the long-run equilibrium price level has declined. Other things being equal, which of the following factors might account for this event?

a. An increase in labor productivity

b. A decrease in the capital stock

c. A decrease in the quantity of money in circulation

d. The discovery of new mineral resources used to produce various goods

e. A technological improvement

Short answer

a.Thus. this factor account for fall in price index.

b. Thus, this is often not the causative factor.

c. The effect of decrease in index number without causing a decrease within the aggregate demand.

d. Thus, this factor account for fall in index number.

e. Thus, this factor account for fall in price index.

Step-by-step solution

Long run Aggregate

An increase within the long term GDP implies that the LR.AS curve shifts towards its right as shown within the below diagram. As there's no change within the aggregate demand (AD) the worth level will fail from $P_1$to $P_2$.

Thus a rise within the real GDP within the long term with none change within the aggregate demand causes a decrease within the equilibriumprice index.
Long Run Aggregate Supply Curve - index number

Increase (a)

(a) An increase parturient productivity: a rise parturient productivity can cause a shift within the LRAS curve increasing the important GDP, and as there's, no change within the AD the worth level will fall. Thus. this factor account for fall inprice index.

Decrease (b)

(b) A decrease in capital stock decreases the productivity of the economy causing the LRAS curve to shift left wards; this causes a rise within the index. Thus,this is often not the causative factor.

Decrease (c)

(c) A decrease within the quantity of cash supplied decreases the mixture demand causing it to shift leftwards, this also reduces the worth, but as per the case discussed within the question there's no change within the aggregate demand. Thus, a decrease within the quantity of cash cannot cause the effect of decrease in index number without causing a decrease within the aggregate demand.

Level Decrease (d)

(d) A discovery of latest natural resource can shift the LRAS curve towards its right causing the value level to decrease. Thus, this factor account for fall inindex number.

Rightwards (e)

(e) A technological improvement increases the productivity of the economy this causes the LRAS curve to shift rightwards; this causes a rise within the real GDP and a decline within the index. Thus, this factor account for fall inprice index.