Which of the following would cause the short-run aggregate supply curve to shift to the right?

• A. A decrease in labor productivity
• B. An increase in corporate taxes
• C. A decrease in input prices, such as wages or raw materials
• D. A rise in the price level

Answer: (C)

Verified step by step guidance

1. Step 1: Understand what causes the short-run aggregate supply (SRAS) curve to shift. The SRAS curve shifts when there is a change in production costs or supply conditions, other than a change in the price level.
2. Step 2: Analyze each option in terms of its effect on production costs. A decrease in labor productivity means workers produce less output per hour, which increases costs and shifts SRAS left, not right.
3. Step 3: Consider an increase in corporate taxes. Higher taxes increase production costs, causing the SRAS curve to shift left, not right.
4. Step 4: Evaluate a decrease in input prices, such as wages or raw materials. Lower input prices reduce production costs, making it cheaper to produce goods and services, which shifts the SRAS curve to the right.
5. Step 5: Understand why a rise in the price level does not shift the SRAS curve. Instead, it causes movement along the SRAS curve, not a shift, because SRAS shows output supplied at different price levels holding other factors constant.