Which of the following shifts the short-run aggregate supply curve to the left?

A) an increase in the price level
B) an increase in the expected price level
C) an increase in the capital stock
D) an increase in interest rates

Question

Which of the following shifts the short-run aggregate supply curve to the left?
 
A) an increase in the price level 
B) an increase in the expected price level 
C) an increase in the capital stock 
D) an increase in interest rates

Quizplus · Accepted Answer

An increase in the expected price level will shift the short-run aggregate supply curve to the left because firms will expect higher prices for their products in the future and will increase their current production costs to match these expected prices. This leads to a decrease in the quantity of output supplied at any given price level, causing the short-run aggregate supply curve to shift leftward. The other options do not cause a shift to the left in the short-run aggregate supply curve.

Which of the Following Shifts the Short-Run Aggregate Supply Curve