Which of the following events would reduce short-run aggregate supply but not long-run aggregate supply?
A) A major natural disaster results in the loss of life of 10% of the labor force.
B) Government environmental regulations require the use of more expensive energy sources.
C) The capital stock of a country rises by 10%.
D) Concentration in the leading industries in a country falls.

Question

Quizplus · Accepted Answer

Government environmental regulations that require the use of more expensive energy sources would increase production costs, reducing short-run aggregate supply. However, in the long run, firms may adapt to these regulations, and the long-run aggregate supply would not be affected.

Which of the Following Events Would Reduce Short-Run Aggregate Supply