If foreign input prices increase and the United States is a purchaser of those inputs,then the U.S.
A) AD curve will shift leftward and U.S.prices will fall.
B) AD curve will shift rightward and U.S.prices will rise.
C) SRAS curve will shift leftward and U.S.prices will rise.
D) SRAS curve will shift rightward and U.S.prices will fall

Question

Quizplus · Accepted Answer

If foreign input prices increase, it will increase the cost of production for U.S. firms that rely on those inputs, thus causing a leftward shift of the SRAS curve. As a result, U.S. prices will rise due to the increased production costs. The AD curve is not affected by this change in input prices.

If Foreign Input Prices Increase and the United States Is