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Looking for some help on this textbook question: Which of the following would cause the short-run...

Looking for some help on this textbook question:

Which of the following would cause the short-run aggregate supply curve to shift upward and to the left?

a.) A negative price shock

b.) A decrease in expected inflation

c.) Aggregate output kept below potential for a significant period of time

d.) All of the above are correct

Thank you in advance!

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Answer #1

The correct answer is option c). When aggregate output is below potential for a significant period of time then aggregate supply curve will shift upward and to the left. A decrease in expected inflation will cause the producers to supply more now. And with the given aggregate demand curve, a negative price shock will shift the curve to the right.

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