Figure 16-7 -Refer to Figure 16-7. Over time, the aggregate supply curve shifts from SRAS₁ to SRAS₂ Because of A) rising output prices. B) economic agents adjust their expectations regarding prices and wages downwards. C) a fall in nominal wages. D) economic agents adjust their expectations regarding prices and wages upwards.

Question

Quizplus · Accepted Answer

When the aggregate supply curve shifts to the right (from SRAS1 to SRAS2), it typically indicates that at every price level, producers are willing and able to supply more goods and services. This can happen for various reasons, including technological advancements, increases in the labor force, or reductions in the costs of production. However, the specific reason mentioned in the choices, which aligns with such a shift, is when economic agents adjust their expectations regarding prices and wages upwards. This adjustment means that workers and firms anticipate higher prices in the future, which can lead to increased production as firms aim to capitalize on these expected higher prices, and workers are more willing to work at current wages if they expect higher wages in the future. This is a dynamic often associated with the concept of supply in the short run, where expectations can significantly impact production decisions.

Figure 16-7 -Refer to Figure 16-7. Over Time, the Aggregate Supply Curve