Given an increase in the input price from $4 to $6,we would expect the aggregate:

Question

Quizplus · Accepted Answer

An increase in the input price would raise the cost of production for firms, which would make it less profitable to produce goods and services at every price level. The higher costs would shift the aggregate supply curve to the left, indicating a lower quantity of goods and services supplied at every price level. However, the potential output, which represents the long-term maximum level of production that the economy can sustain based on its resources and technology, is not affected by the short-term changes in input prices. Therefore, we would expect the aggregate supply curve to shift to the left, while the potential output remains constant.

Given an Increase in the Input Price from $4 to $6,we