If workers and firms expect increases in future prices, it can lead the short run aggregate supply curve to shift left.

Question

Quizplus · Accepted Answer

If workers and firms expect increases in future prices, they will demand higher wages and prices for their goods respectively, which will lead to an increase in production costs and a decrease in short run aggregate supply. Therefore, the short run aggregate supply curve will shift left.

If Workers and Firms Expect Increases in Future Prices, It