A decrease in the expected price level shifts
A)only the long-run aggregate supply curve right.
B)only the short-run aggregate supply curve right.
C)both the short-run and the long-run aggregate supply curve right.
D)Neither the short-run nor the long-run aggregate supply curve right.

Question

Quizplus · Accepted Answer

A decrease in the expected price level will shift the short-run aggregate supply curve rightward due to the sticky wages and prices in the short-run. However, in the long-run, the expected price level and actual price level converge, and the long-run aggregate supply curve remains unchanged.

A Decrease in the Expected Price Level Shifts