Will the aggregate supply curve shift to the left or right?

Question

If money that could be used to increase production is spent on other company expenses, not related to production, would the aggregated supply curve shift to the right or left?

Answer 1

To the left.
When you hace less money for production, less is produced. When there is less production, there is less supply. So the curve shifts to the left (called a negative shock on the supply side).

Answer 2

Rumtscho is right that the curve will shift left if there is a supply shock, but you could also say the curve doesn't move if no money is actually taken away from production (and only new money is spent elsewhere).

But if you have to chose left or right, then the answer is left as it certainly won't go right (which indicates more is being supplied).

Answer 3

I double-checked my textbook to make advantageous, besides the fact that if it sort of feels to me that pastime cost adjustments are led to with the help of adjustments in mixture call for, no longer any opposite direction around. If the blend call for will boost, the advert curve might shift to the main superb, which might shrink unemployment and boost inflation. a upward push in government spending may be a upward push in mixture call for, the advert curve might shift to the main superb. this would not reason an prompt replace in AS, besides the fact that if i think if the government spending replace into directed in the direction of new technologies or capital products it might boost AS. on the grounds that government spending is area of GDP, nominal GDP might boost with a upward push in government spending. productiveness might boost to the quantity that genuine in keeping with-capita GDP greater. it might rely on how maximum of the upward push in government spending went in the direction of greater genuine output as adversarial to inflation. greater government spending might placed upwards tension on the fee point, increasing inflation. As advert will boost, unemployment decreases. This answer assumes that the upward push in government spending is financed with the help of government debt as adversarial to being paid for promptly with greater taxes. a upward push in taxes might have a thoroughly distinctive result on the economic device. for example, there may be no inflationary tension because of the fact there may be no new money created. advert does no longer inevitably shift because of the fact the better government spending may be offset to a great volume with the help of a shrink in shopper spending. very own low fee expenses might shrink to pay for greater taxes, which might decrease investment, which might shift the AS curve leftward.