Figure 15-2. -Refer to Figure 15-2. The shift of the short-run aggregate-supply curve from AS₁ to AS₂ A) could be caused by an outbreak of war in the Middle East. B) could be caused by a decrease in the expected price level. C) causes the economy to experience an increase in the unemployment rate. D) causes the economy to experience stagflation.

Question

Quizplus · Accepted Answer

The shift of the short-run aggregate-supply curve is due to a decrease in the expected price level, which would lead to lower costs of production and an increase in aggregate supply. War in the Middle East would likely affect aggregate demand, not aggregate supply. The increase in aggregate supply would lead to a decrease in the price level, not an increase in the unemployment rate. Stagflation is characterized by a decrease in aggregate supply and an increase in the price level, which is not the case in this scenario.

Figure 15-2. -Refer to Figure 15-2. the Shift of the Short-Run Aggregate-Supply