ke Identify which of the four figures below represents the e

ke Identify which of the four figures below represents the effect of increasing input costs for all industries, all other things constant, in the short run. 1 enlarge + enlarge + enlarge + enlarge + ne gregate Demand and Aggregate Supply dx d)

Solution

It is the second figure where the Aggregate Supply curve shifts leftwards. The leftward shift of the AS curve represents the effect of increasing input costs for all industries in the short run, other things being constant. An increase in the input cost will force the producer to decrease it\'s supply as the cost of producing the output has increased which also leads to an increase in the price level. The Aggregate Demand curve does not shift as other are constant.