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Aggregate Demand and Supply Question
For the factors that shift SR agg supply,
why is it that if owners of resources expect future prices to rise (inflation) , they would have an incentive to withhold their resources from the market and the SRAS shifts to the left, and if future prices to fall (deflation), they would have an incentive to sell immediately, shifting SRAS to right..
Why I am confused is that, if future prices will rise, wouldn’t resource owners want to increase SUPPLY now, before it gets too expensive to supply it in the future?
For example, when there is an unanticipated upward shift in aggregate demand, this increase the PRICE LEVEL and the SR SRAS shifts to the LEFT because PRODUCTION COSTS become too EXPENSIVE…
I hate economics |
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