Discussion
The short run aggregate supply curve will shift to the right when:
Answer: B
The short run aggregate supply curve shifts to the right when the cost of production falls or productive capacity grows. A fall in the prices of inputs lowers the cost of producing each level of output, so firms supply more at each price level. Higher energy prices and a lower rate of productivity raise costs and shift it to the left. Lower investment spending is a change in aggregate demand and, in the short run, does not raise supply. The answer is that the prices of inputs decrease, option B.
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