Question

When production costs rise,a.the short-run aggregate supply curve shifts to the right. b.the short-run aggregate supply curve shifts to the left. c.the aggregate demand curve shifts to the right. d.the aggregate demand curve shifts to the left.

Answer 1

Answer: b. the short-run aggregate supply curve shifts to the left

Explanation: aggregate supply is also referred to as the short-run aggregate supply or SRAS. The aggregate supply curve is a model that shows what determines total supply for the economy and how total supply interacts at the macroeconomic level. Movements of the aggregate supply curve in an AS diagram will result in a different equilibrium output and price level. The aggregate supply curve would shift to the left as the price of key inputs (production costs) rises. Increases in production costs would cause the SRAS curve to shift to the left at each given price level for outputs, this translates to a reduction in production because the possibility for earning profit is reduced. This outcome also makes it possible for a combination of lower output, higher unemployment rates, and higher inflation.

Answer 2

The short-run aggregate supply curve shifts to the left.

Step-by-step explanation:

A shift in aggregate supply can be as a result of many factors such as changes in the size and quality of labor, technological innovations, an increase in wages, an increase in the cost of production, changes in inflation and changes in the amount of producers taxes.

Increases in the price of such inputs could lead to a shift of the SRAS curve to the left, which means that at each given price level for outputs, a higher price for inputs will hinder production.