Which of the following events is least likely to cause a decrease in short-run aggregate supply? A) Oil exporting countries reduce their production levels. B) A labor stoppage causes the price of steel to rise. C) Inflation increases from 4% to 7%. The answer is C with explanation: Changes in the price level represent movement along the short-run aggregate supply curve. The other items listed are events that are likely to shift the short-run aggregate supply curve to the left (decrease SRAS). What are they looking for? A shift in the SRAS or a move along the SRAS (left)? Also, which answer will do what (shift or move along curve)? Thanks in advance!
This is a very tricky question. If you are aware that options A and B increase the SRAS, you would choose C even the case when you dont know that C) does not increase nor decrease SRAS, you stay on the same SRAS.
Thanks Harrogath! And yes, after staring at Econ questions for so many hours, I start to question my own sanity.
Inflation is a average change in price level, and if you look at the demand & supply curve properties, on;ly a change in price will cause a movement along the supply surve, any other thing that has nothing to do with price, then it will cause a shift.
Exactly !