Other things equal, a decrease in the price level will:
A)shift the short run aggregate supply curve to the left.
B)shift the aggregate demand curve to the left.
C)cause a movement up a short-run aggregate supply curve.
D)cause a movement down a short run aggregate supply curve.

Question

Quizplus · Accepted Answer

A decrease in the price level will cause a movement down a short run aggregate supply curve because as prices decrease, firms are willing to produce less output at each price level due to the decrease in profitability.

Other Things Equal, a Decrease in the Price Level Will