How does the aggregate demand and aggregate supply model reflect a rise in production costs?
A)The short-run aggregate supply curve shifts to the right.
B)The short-run aggregate supply curve shifts to the left.
C)The aggregate demand curve shifts to the right.
D)The aggregate demand curve shifts to the left.

Question

Quizplus · Accepted Answer

A rise in production costs will lead to higher input costs for firms, reducing their willingness to supply goods and services at every price level. This will cause the short-run aggregate supply curve to shift to the left, resulting in a decrease in output and an increase in price level.

How Does the Aggregate Demand and Aggregate Supply Model Reflect