An increase in short-run aggregate supply could be the result of a(n)
A) increase in the general price level.
B) negative supply shock.
C) increase in the price of oil.
D) increase in consumption spending.
E) reduction in expected future prices.

Question

Quizplus · Accepted Answer

A reduction in expected future prices would increase short-run aggregate supply because suppliers would increase production in order to sell their goods before prices fall further. The other options would decrease short-run aggregate supply – A and B would increase costs for businesses and decrease their willingness to produce, C would increase input costs for many businesses, and D would increase demand for goods and services without affecting production capacity in the short run.

An Increase in Short-Run Aggregate Supply Could Be the Result