Which of the following will most likely increase short-run aggregate supply?
A) unfavorable weather conditions in the nation's agricultural areas
B) an increase in income tax rates
C) an increase in the expected inflation rate
D) a reduction in resource prices

Question

Quizplus · Accepted Answer

A reduction in resource prices would lower the cost of production for firms, thus increasing their profitability and ability to produce more output in the short run, leading to an increase in short-run aggregate supply. The other options would have the opposite effect, by increasing costs for firms and decreasing their ability to produce in the short run.

Which of the Following Will Most Likely Increase Short-Run Aggregate