Which of the following shifts the short-run, but not the long-run, aggregate supply right?
A) a decrease in the price level
B) a decrease in the expected price level
C) a decrease in the natural rate of unemployment
D) a decrease in the savings rate

Question

Quizplus · Accepted Answer

A decrease in the expected price level shifts the short-run aggregate supply right because it reduces production costs for firms, leading to a higher level of output and a lower price level in the short run. However, in the long run, expectations adjust to the actual price level, and the economy returns to the natural rate of unemployment, so there is no shift in the long-run aggregate supply. The other choices all shift the long-run aggregate supply as well.

Which of the Following Shifts the Short-Run, but Not the Long-Run