An increase in the expected price level shifts the
A)short-run and long-run aggregate supply curves left.
B)the short-run but not the long-run aggregate supply curve left.
C)the long-run but not the short-run aggregate supply curve left.
D)neither the long-run nor the short-run aggregate supply curve left.

Question

Quizplus · Accepted Answer

An increase in the expected price level typically causes firms to anticipate higher costs, leading them to reduce output in the short run, thus shifting the short-run aggregate supply curve to the left. However, in the long run, prices and wages are flexible, and the long-run aggregate supply curve remains unchanged.

An Increase in the Expected Price Level Shifts the