What happens if business expectations improve?
A) Aggregate supply shifts to the left.
B) Aggregate supply shifts to the right.
C) Aggregate demand shifts to the left.
D) Aggregate demand shifts to the right.

Question

Quizplus · Accepted Answer

If business expectations improve, firms become more optimistic about future profits and may invest in more capital and hire more workers to increase output. This leads to an increase in aggregate supply and a rightward shift of the SRAS curve. As a result, the equilibrium price level decreases while the equilibrium level of output increases.

What Happens If Business Expectations Improve