Question

Which of the following would be most likely to cause the short-run aggregate supply curve to shift left?

A reduction in oil prices due to increased drilling.

A rise in government spending.

A decrease in investor confidence.

A spike in food prices due to a drought.

Answer 1

Answer: A spike in food prices due to a drought

Reduction in oil prices reduces aggregate production cost and consequently shift the aggregate supply curve to the right

A rising government spending shifts aggregate demand but does not affect aggregate supply

Investor confidence may raise investment and shipped aggregate demand however it will not shift aggregate supply