What is the difference between an increase in cost of production and increase in price level?

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What is the difference between an increase in cost of production and increase in price level?




Answer: An increase in the cost of production shirts the SRAS curve leftward, reducing quantity of output produced at a given price level. An increase in the price level itself → the weighted average of the prices of all goods and services we produce → would cause us to move from one point on the SRAS curve to another point on the same (unmoving) curve.

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