Other things equal, the short-run aggregate supply curve shifts positions when
A) the price level changes.
B) the rate of inﬂation changes.
C) nominal wages and other input prices change.
D) aggregate demand changes.

Question

Quizplus · Accepted Answer

The short-run aggregate supply curve represents the relationship between the price level and the quantity of output that firms are willing to supply, holding constant the prices of inputs such as wages. If nominal wages and other input prices change, this shifts the short-run aggregate supply curve. A decrease in input prices, for example, would lead to a decrease in production costs, which would increase profitability and supply at any given price level, shifting the curve to the right. Conversely, an increase in input prices would shift the curve to the left. Changes in the price level, inflation rate, or aggregate demand would affect the quantity of output supplied at any given point on the curve but would not shift the curve itself.

Other Things Equal, the Short-Run Aggregate Supply Curve Shifts Positions