Which statement is consistent with the theory of aggregate supply?
A) An increase in the expected price level shifts the short-run aggregate-supply curve to the right, and an increase in the actual price level shifts the short-run aggregate supply to the right.
B) An increase in the expected price level shifts the short-run aggregate-supply curve to the right, and an increase in the actual price level does not shift the short-run aggregate supply.
C) An increase in the expected price level shifts the short-run aggregate-supply curve to the left, and an increase in the actual price level shifts the short-run aggregate supply to the left.
D) An increase in the expected price level shifts the short-run aggregate-supply curve to the left, and an increase in the actual price level does not shift the short-run aggregate supply.

Question

Quizplus · Accepted Answer

An increase in the expected price level shifts the short-run aggregate-supply curve to the left because producers expect higher prices for their products and may reduce output in anticipation of these higher prices. An increase in the actual price level does not shift the short-run aggregate supply curve; it moves along the curve as the actual price level affects the quantity of goods and services supplied in the short run, not the position of the curve itself.

Which Statement Is Consistent with the Theory of Aggregate Supply