Which of the following shifts the short-run, but not the long-run, aggregate supply right?
A)a decrease in the price level
B)a decrease in the expected price level
C)a decrease in the capital stock
D)an increase in the money supply

Question

Quizplus · Accepted Answer

A decrease in the expected price level shifts the short-run aggregate supply right because it reduces firms' production costs and increases their output in the short run. However, in the long run, wages and other input prices adjust to the lower price level, so the aggregate supply curve shifts back to its original position. The other choices (A, C, and D) would shift both the short-run and long-run aggregate supply curves.

Which of the Following Shifts the Short-Run, but Not the Long-Run