An increase in the expected price level
A)shifts the short-run aggregate supply curve up and to the left.
B)shifts the short-run aggregate supply curve down and to the right.
C)has no effect on the short-run aggregate supply curve.
D)results in a movement along the short-run aggregate supply curve, rather than a shift in the short-run aggregate supply curve.

Question

Quizplus · Accepted Answer

An increase in the expected price level would cause firms to expect higher prices for their goods and services, which would increase their production costs. This would shift the short-run aggregate supply curve up and to the left, indicating a decrease in the quantity of goods and services that can be supplied at any given price level.

An Increase in the Expected Price Level