In the aggregate demand-aggregate supply model, everything else remaining unchanged, an increase in production costs shifts the _____curve to the _____.
A)long-run aggregate supply; right
B)long-run aggregate supply; left
C)short-run aggregate supply; right
D)short-run aggregate supply; left

Question

Quizplus · Accepted Answer

An increase in production cost typically leads to a decrease in short-run aggregate supply, as firms face higher costs of production and are less willing to produce the same level of output at existing price levels. As a result, the short-run aggregate supply curve shifts to the left.

In the Aggregate Demand-Aggregate Supply Model, Everything Else Remaining Unchanged