A change in short-run aggregate supply from AS3 to AS1 can be caused by
a decrease in productivity.
a decrease in consumer wealth.
a decrease in the degree of excess capacity.
an increase in consumer confidence.
a decrease in business taxes.
The correct option is A DECREASE IN BUSINESS TAXES. Aggregate supply refers to the total quantity of goods and services produced in a country on a yearly basis. There may be short run or long run changes in the aggregate supply of a country as a result of changes in some factors. Short run changes in aggregate supply is said to occur when the prices of products and services change but the prices and productivity of the factor inputs remain constant. Short run changes in aggregate supply is caused by many factors and changes in government taxation is one of these. When the rate of business tax is reduced, it results in outward shift in the short run aggregate supply curve.
