Question

16. An increase in labour hours wil lead to bx. an upward shift of the aggregate production function. by. a movement along the aggregate production function. bz. both a movement along and an upward shift of the aggregate production function. ca. neither a movement along nor a shift of the aggregate production function b a downward shift of the aggregate production fiunction.

Answer 1

An increase in labour hours will lead a movement along the aggregate production function.

An increase in labour hours will cause movement along the Aggregate production function.Output will increase less with additional increase in labour hours because when we have more of a factor ,increase in output from using more of that input is lower due to diminishing marginal product.So the more hours of labour we have, less output we get from additional labour. Shift in production function occurs when there is technological improvement.