Which statement regarding the short-run aggregate supply curve is TRUE?
A) The short-run aggregate supply curve shifts to the left when tax rates on businesses are lowered.
B) The short-run aggregate supply curve shifts to the right when the costs of capital rise.
C) The short-run aggregate supply curve shifts to the left when business expectations become more positive.
D) The short-run aggregate supply curve shifts to the right with a reduction in burdensome regulations.

Question

Quizplus · Accepted Answer

A reduction in burdensome regulations would decrease the costs businesses face, leading to an increase in short-run aggregate supply and a shift to the right of the curve. Lowering tax rates on businesses (A) would increase their profitability, but it would not necessarily reduce costs, so this would not shift the short-run aggregate supply curve. Similarly, rising costs of capital (B) would increase costs for businesses, leading to a decrease in short-run aggregate supply and a shift to the left of the curve. Positive business expectations (C) might encourage more investment, but they would not directly impact costs, so this would not shift the short-run aggregate supply curve.

Which Statement Regarding the Short-Run Aggregate Supply Curve Is TRUE