Which factor can cause shifts in the aggregate supply curve?

The aggregate supply curve represents the total quantity of goods and services that producers in an economy are willing and able to supply at different price levels. A shift in this curve indicates a change in the ability of producers to supply these goods and services, which can be influenced by several external factors.

Government regulations can significantly impact the aggregate supply curve. For instance, if a government imposes stricter regulations on emissions, labor practices, or product safety, this can increase the production costs for businesses. As a result, producers might be less willing or able to supply the same quantity of goods at given price levels, leading to a leftward shift in the aggregate supply curve. Conversely, deregulation or incentives such as tax breaks could lower production costs, prompting a rightward shift in the curve as more goods become available at the same price levels.

In contrast, while consumer demand changes, inflation rates, and international trade policies can influence economic conditions, they primarily affect the aggregate demand curve rather than directly causing shifts in the aggregate supply curve. Understanding the distinction between these concepts is crucial for grasping how various factors impact the overall economy.