A decrease in the price of machinery
A) shifts the SRAS curve to the right.
B) shifts the SRAS curve to the left.
C) causes an upward movement along the existing SRAS curve.
D) causes a downward movement along the existing SRAS curve.
E) none of the above

Question

Quizplus · Accepted Answer

A decrease in the price of machinery would reduce the production costs for firms which would result in an increase in the short-run aggregate supply (SRAS) and a shift to the right of the SRAS curve. This is because firms can now produce the same amount of output at a lower cost, leading to higher profits and an incentive to increase production.

A Decrease in the Price of Machinery