What impact will higher production costs have on short-run aggregate supply?
A)It will decrease, illustrated by a rightward shift in the SRAS curve.
B)It will increase, illustrated by a leftward shift in the SRAS curve.
C)It will decrease, illustrated by a leftward shift in the SRAS curve.
D)It will increase, illustrated by a rightward shift in the SRAS curve.

Question

Quizplus · Accepted Answer

Higher production costs will lead to a decrease in short-run aggregate supply (SRAS) as it becomes less profitable for firms to produce goods and services. This decrease is illustrated by a leftward shift in the SRAS curve.

What Impact Will Higher Production Costs Have on Short-Run Aggregate