Figure 17-3

-In Figure 17-3 above,SAS0 must shift to SAS₁ when
A)the actual price level rises.
B)the expected price level rises.
C)AD₀ shifts to AD₁.
D)the nominal money supply rises.

Question

Figure 17-3
 
-In Figure 17-3 above,SAS0 must shift to SAS₁ when
A)the actual price level rises. 
B)the expected price level rises. 
C)AD₀ shifts to AD₁. 
D)the nominal money supply rises.

Quizplus · Accepted Answer

When the expected price level rises, firms anticipate higher costs for inputs and may raise prices to maintain profit margins, leading to a shift in the Short-Run Aggregate Supply (SAS) curve from SAS0 to SAS1. This reflects adjustments in production costs and pricing strategies in response to inflation expectations.

Figure 17-3 -In Figure 17-3 Above,SAS0 Must Shift to SAS₁ When