An increase in future price expectations may act like a cost shock, shifting the aggregate supply curve to the left.

Name: An increase in future price expectations may act like a cost shock, shifting the aggregate supply curve to the left.
Brand: Quizplus
Rating: 4.9 (41 reviews)

Question

Quizplus · Accepted Answer

An increase in future price expectations might cause firms to increase their input costs in order to produce the same amount of output. As a result, the aggregate supply curve shifts to the left, indicating a decrease in aggregate supply.

An Increase in Future Price Expectations May Act Like a Cost