An increase in production costs is most likely to shift the:
A)short-run aggregate supply curve up (to the left).
B)short-run aggregate supply curve down (to the right).
C)aggregate demand curve to the left.
D)aggregate demand curve to the right.

Question

Quizplus · Accepted Answer

An increase in production costs, such as higher wages or raw material prices, makes production more expensive at all levels of output. This typically results in a decrease in the quantity of goods and services supplied at any given price level, shifting the short-run aggregate supply curve to the left (or up), not affecting the aggregate demand directly.

An Increase in Production Costs Is Most Likely to Shift