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

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

Answer: (B)

Verified step by step guidance

1. Step 1: Understand what the short-run aggregate supply (SRAS) curve represents. The SRAS curve shows the relationship between the price level and the quantity of goods and services that firms are willing to produce in the short run, holding other factors constant.
2. Step 2: Recall that a rightward shift of the SRAS curve means that at every price level, firms are willing to supply more output. This typically happens when production becomes cheaper or more efficient.
3. Step 3: Analyze each option in terms of its effect on production costs or productivity: an increase in the expected price level usually shifts SRAS left because firms anticipate higher costs; a decrease in input prices (like wages or raw materials) lowers production costs, encouraging more supply and shifting SRAS right; a decrease in productivity means firms produce less with the same inputs, shifting SRAS left; an increase in business taxes raises costs, shifting SRAS left.
4. Step 4: Conclude that the factor causing the SRAS curve to shift right is the decrease in input prices, as it reduces production costs and allows firms to supply more at every price level.
5. Step 5: Summarize that understanding how input costs and productivity affect firms' willingness to supply output is key to determining shifts in the SRAS curve.