Which of the following shifts both short-run and long-run aggregate supply to the left?
A) a decrease in the actual rate of inflation
B) a decrease in the expected rate of inflation
C) a decrease in the capital stock
D) a drought in the Midwest agricultural areas.

Question

Quizplus · Accepted Answer

A decrease in capital stock would cause a decrease in both short-run and long-run aggregate supply. A decrease in actual rate of inflation (option A) would shift short-run aggregate supply to the right, but would not affect long-run aggregate supply. A decrease in expected rate of inflation (option B) would have similar effects as option A. A drought in the Midwest agricultural areas (option D) would shift short-run aggregate supply to the left due to a decrease in the supply of agricultural goods, but would not affect long-run aggregate supply.

Which of the Following Shifts Both Short-Run and Long-Run Aggregate