Which of the following changes shifts the SRAS curve down?
A) a decrease in the labour force
B) a decrease in firms' costs
C) an increase in government purchases
D) a decrease in the money supply

Question

Quizplus · Accepted Answer

A decrease in firms' costs lowers the cost of production, thus shifting the short-run aggregate supply (SRAS) curve down. Option A (a decrease in the labour force) would shift the SRAS curve up as there are fewer workers available to produce goods and services, leading to higher costs. Option C (an increase in government purchases) would shift the aggregate demand (AD) curve to the right, increasing both output and price level in the short run. Option D (a decrease in the money supply) would contract the AD, leading to a leftward shift in the AD curve and a lower output and price level in the short run.

Which of the Following Changes Shifts the SRAS Curve Down