The short-run aggregate supply is most likely to shift down (to the right) when actual output is:
A)equal to potential output.
B)less than potential output
C)greater than potential output.
D)not equal to potential output, regardless of whether it is above or below.

Question

Quizplus · Accepted Answer

When actual output is less than potential output, firms are operating below capacity and have excess capacity. This means that they can increase output without incurring significant additional costs. As a result, the short-run aggregate supply curve will shift down (to the right).

The Short-Run Aggregate Supply Is Most Likely to Shift Down