An increase in the price level
A)shifts the short-run aggregate supply curve up and to the left.
B)shifts the short-run aggregate supply curve down and to the right.
C)shifts the long-run aggregate supply curve to the left.
D)results in a movement along the short-run aggregate supply curve, rather than a shift in the short-run aggregate supply curve.

Question

Quizplus · Accepted Answer

An increase in the price level leads to a movement up along the short-run aggregate supply curve, rather than causing a shift in the short-run aggregate supply curve. This is because higher prices increase the profitability of producing output, which leads to firms increasing their output in the short-run. However, in the long-run, firms can adjust their production processes and resource usage, causing the short-run aggregate supply curve to shift.

An Increase in the Price Level