Which of the following is consistent with the theory of aggregate supply?
A)An increase in the expected price level shifts the short-run aggregate supply curve to the right, and an increase in the actual price level shifts the short-run aggregate supply to the right.
B)An increase in the expected price level shifts the short-run aggregate supply curve to the right, and an increase in the actual price level does not shift the short-run aggregate supply.
C)An increase in the expected price level shifts the short-run aggregate supply curve to the left, and an increase in the actual price level shifts the short-run aggregate supply to the left.
D)An increase in the expected price level shifts the short-run aggregate supply curve to the left, and an increase in the actual price level does not shift the short-run aggregate supply.

Question

Quizplus · Accepted Answer

An increase in the expected price level typically shifts the short-run aggregate supply curve to the left because firms anticipate higher costs and reduce output. An increase in the actual price level does not shift the short-run aggregate supply curve; it results in movement along the curve.

Which of the Following Is Consistent with the Theory of Aggregate