An increase in input productivity typically leads to lower production costs, which can increase the overall supply of goods and services in the economy. This would generally result in a rightward shift of the aggregate supply curve, leading to a higher real output and potentially a lower equilibrium price level.
With this understanding, you can evaluate the multiple choice options provided:
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Shift the aggregate supply curve leftward. - This is incorrect. An increase in productivity shifts the aggregate supply curve rightward, not leftward.
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Reduce the equilibrium price level, assuming downward flexible prices. - This is likely correct. Increased productivity can lead to lower costs and a greater supply, which can reduce the equilibrium price level.
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Reduce the equilibrium real output. - This is incorrect. Increased productivity typically increases real output rather than reducing it.
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Reduce aggregate demand. - This is incorrect. Increased productivity affects aggregate supply, not directly aggregate demand.
Based on these evaluations, the correct answer is: reduce the equilibrium price level, assuming downward flexible prices.