What is the impact of technological innovation on aggregate supply?

Technological innovation typically leads to more efficient production methods, which can significantly enhance the output of goods and services. This efficiency gained from technological advancements allows companies to produce more with the same amount of resources, thereby increasing overall productivity. When aggregate supply increases as a result of these innovations, the aggregate supply curve shifts to the right.

This rightward shift indicates that for any given price level, a higher quantity of goods and services is now available in the economy. The increase in aggregate supply can lead to lower prices due to greater availability of products, benefiting consumers. Overall, the role of technological innovation in enhancing production capabilities and reducing costs supports the notion that it positively impacts aggregate supply.