What is the effect of an increase in input prices on the short-run aggregate supply curve?
A)It shifts rightward, which means the quantity supplied at any price level increases.
B)It shifts leftward, which means the quantity supplied at any price level increases.
C)It shifts rightward, which means the quantity supplied at any price level declines.
D)It shifts leftward, which means the quantity supplied at any price level declines.

Question

Quizplus · Accepted Answer

An increase in input prices will cause an increase in production costs for firms, which reduces their profitability. Thus, firms will reduce production output and supply fewer goods and services at any price level. This results in a leftward shift of the short-run aggregate supply curve.

What Is the Effect of an Increase in Input Prices