In the aggregate demand-aggregate supply model, an increase in the expected price level, everything else remaining unchanged, causes the _____curve to shift_____ .
A)short-run aggregate supply; right
B)short-run aggregate supply; left
C)aggregate-demand; left
D)aggregate-demand; right

Question

Quizplus · Accepted Answer

An increase in the expected price level leads to a decrease in the short-run aggregate supply curve, shifting it to the left. This is because firms will expect higher input costs, causing them to produce less at every price level.

In the Aggregate Demand-Aggregate Supply Model, an Increase in the Expected