Question

The short-run aggregate supply curve is likely to shift left when there isan increase in the degree of excess capacity.a. Trueb. False

Answer 1

a. True

Step-by-step explanation:

An increase in the degree of excess capacity results from a decrease in productivity. In other words, factories have excess capacity when they are producing less or they are producing an output level which is lower than expected or planned. A decrease in productivity shifts the SRAS curve to the left.