Refer to the following figure to answer the questions that follow.

-Based on the figure,which of the following would cause the short-run aggregate supply curve to shift from SRAS₁ to SRAS₂?
A) Congress votes to increase the minimum wage.
B) There is an increase in spending and firms respond by producing more output.
C) Wages and input prices fall as the economy recovers from a recession.
D) A severe drought reduces farm production.
E) A temporary rise in the price of oil results in higher gasoline prices.

Question

Refer to the following figure to answer the questions that follow.
 
-Based on the figure,which of the following would cause the short-run aggregate supply curve to shift from SRAS₁ to SRAS₂?
A) Congress votes to increase the minimum wage. 
B) There is an increase in spending and firms respond by producing more output. 
C) Wages and input prices fall as the economy recovers from a recession. 
D) A severe drought reduces farm production. 
E) A temporary rise in the price of oil results in higher gasoline prices.

Quizplus · Accepted Answer

A fall in wages and input prices reduces production costs, leading to an increase in short-run aggregate supply, shifting the curve to the right from SRAS₁ to SRAS₂.

Refer to the Following Figure to Answer the Questions That