Which of the following shifts short-run, but not long-run aggregate supply to the right?
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 the expected rate of inflation shifts short-run aggregate supply to the right because it lowers production costs for firms, but it does not have an effect on the long-run aggregate supply, which is determined by the potential output of an economy. The other choices either have no effect on short-run aggregate supply (A) or shift it to the left (C and D).

Which of the Following Shifts Short-Run, but Not Long-Run Aggregate