A question form Schweser Qbank: Which of the following events is least likely to cause a downward shift in short-run aggregate supply? A) A labor stoppage causes the price of steel to rise. B) Oil exporting countries reduce their production levels. C) Inflation increases from 4% to 7%. The correct answer was C) Inflation increases from 4% to 7%. 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). I can not understand why choice C i correct? when the question is asking a downward shift in short run aggregate supply, does not mean a shift to the right (whole the supply curve shifts to the right which means more production with lower price)?
I think what it is meaning to say is that a shift affects the price level, not the other way around. That is why it is on the Y axis in the graph. But I could be wrong, I always hated macro in undergrad for its use of “concepts” and not equations.
i think that by increasing prices the suply will move upwards to catch higher prices at the same quantity; so this increase in inflation will not shift supply downward.
The first two are the cause of a shift in SRAS, the third is the effect of it.