ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The aggregate supply curve shifts to the left as the price of key inputs rises, making a combination of lower output, higher unemployment, and higher inflation possible. When an economy experiences stagnant growth and high inflation at the same time it is referred to as stagflation.

Detailed explanation-2: -Shifts in the short run aggregate supply curve are caused by changes in inflationary expectations; changes in worker force and capital stock availability; changes in government action (not the same as government expenditure); changes in productivity; and supply shocks.

Detailed explanation-3: -Option c. This option is correct because as the expected price level rises then the aggregate supply curve shifts leftward. It causes an increase in price level and decreases output in an economy.

Detailed explanation-4: -An increase in factor prices should decrease the quantity suppliers will offer at any price, shifting the supply curve to the left. A reduction in factor prices increases the quantity suppliers will offer at any price, shifting the supply curve to the right.