(Figure: Determining SRAS Shifts) If there is a decrease in input prices, the short-run aggregate supply curve will shift from SRAS₀ to _____, and the price level will shift to _____. A) SRAS₁; P₀ B) SRAS₁; P₁ C) SRAS₂; P₁ D) SRAS₂; P₂

Question

Quizplus · Accepted Answer

A decrease in input prices will shift the SRAS curve to the right, indicating an increase in short-run aggregate supply. Therefore, the new SRAS curve will be SRAS₁. This will lead to a lower price level, which will shift from P₀ to P₁.

(Figure: Determining SRAS Shifts) If There Is a Decrease in Input