A leftward shift in the aggregate supply curve generates a ________ inflation and ________ output.
A) demand-pull; lower
B) cost-push; higher
C) demand-pull; higher
D) cost-push; lower

Question

Quizplus · Accepted Answer

A leftward shift in the aggregate supply curve represents a decrease in the economy's ability to produce goods and services. This can result from factors such as an increase in input costs or a decrease in productivity. As a result of the leftward shift, the equilibrium point moves to the left, resulting in a decrease in output and an increase in prices. This is known as cost-push inflation. Therefore, the correct answer is D, as it represents cost-push inflation and lower output.

A Leftward Shift in the Aggregate Supply Curve Generates a ________