Suppose Americans buy inputs from foreigners.When the price of foreign inputs falls,the U.S.SRAS curve __________,which tends to __________the U.S.price level.
A) shifts rightward; reduce
B) shifts leftward; increase
C) shifts leftward; reduce
D) remains constant; increase

Question

Quizplus · Accepted Answer

When the price of foreign inputs falls, the cost of production for American companies decreases. This leads to an increase in supply, represented by a rightward shift of the Short-Run Aggregate Supply (SRAS) curve. A rightward shift in the SRAS curve tends to reduce the price level, as more goods and services are available at lower prices.

Suppose Americans Buy Inputs from Foreigners