Increase in factor productivity boosts aggregate supply Steps:

• Factor productivity rise means more output per input, reducing production costs.
• Lower costs allow firms to supply more at each price level.
• This shifts the aggregate supply (AS) curve rightward.
• Rightward AS shift is a downward movement on the diagram, increasing total output.

Why A is correct:

• Downward shift of AS reflects increased supply from higher productivity, per the definition of supply curve shifts where downward means more quantity supplied at every price.

Why the others are wrong:

• B: Aggregate demand shifts from changes in spending, not productivity (supply-side factor).
• C: Upward AS shift signals decreased supply, opposite of productivity gain.
• D: AD downward shift indicates reduced demand, unrelated to productivity.

Final answer: A