(Figure: Shifts in SRAS and AD) Starting at equilibrium point d, if the cost of inputs rises, the short-run equilibrium will move to point _____, and thus real output will _____ and the price level will _____.

Question

Quizplus · Accepted Answer

If the cost of inputs rises, it will cause the short-run aggregate supply curve to shift leftward from SRAS1 to SRAS2, resulting in a new equilibrium point at b with lower real output and higher price level. Therefore, the best choice is B.

(Figure: Shifts in SRAS and AD) Starting at Equilibrium Point