Aggregate supply shifts to the left when
A) input prices rise.
B) subsidies are higher.
C) inflation expectations are lower.
D) there is a decrease in regulations.

Question

Quizplus · Accepted Answer

When input prices rise, it becomes more expensive for firms to produce goods and services, leading to an increase in the cost of production. This, in turn, causes a decrease in profit margins, which leads to a decrease in the quantity of goods and services supplied in the economy. Hence, aggregate supply shifts to the left.  Subsidies, lower inflation expectations, and decreased regulations would not cause a shift in aggregate supply to the left.

Aggregate Supply Shifts to the Left When