A(n) ________ in inflationary expectations that causes firms to decrease their prices shifts the aggregate supply curve to the ________.
A) increase; right
B) increase; left
C) decrease; right
D) decrease; left

Question

Quizplus · Accepted Answer

A decrease in inflationary expectations can lead to firms lowering their prices, which effectively reduces their costs. This makes it cheaper for them to produce goods and services, thus increasing the quantity supplied at every price level, which shifts the aggregate supply curve to the right.

A(n) ________ in Inflationary Expectations That Causes Firms to Decrease