A decrease in the expected price level shifts short-run aggregate supply to the left. This occurs because a decrease in prices discourages production and causes firms to produce less. This in turn creates an excess demand in the economy, leading to an increase in prices. Since firms are expecting a higher price level, they produce less, which results in a decrease in the aggregate supply.

The decrease in the expected price level can be caused by a number of factors. These include changes in the money supply, taxes, government regulations, and changes in consumer expectations. When there is a decrease in the money supply for example, this reduces the amount of purchasing power in the economy. This in turn decreases the amount of goods and services that can be demanded at a given price level. This reduces the expected price level, resulting in a shift of the aggregate supply to the left.

It is important to note that the shift in the short-run aggregate supply only applies in the short-term. In the long-term, the expected price level will eventually be reached and the aggregate supply will shift back to the right. In order to ensure a healthy economy, it is important for governments to manage short-term aggregate supply through the use of monetary and fiscal policies.

In conclusion, a decrease in the expected price level shifts short-run aggregate supply to the left. This occurs due to a decrease in the amount of goods and services that can be demanded at a given price level. This results in firms producing less and an excess demand for goods and services. In order to ensure a healthy economy, it is important for governments to manage short-term aggregate supply through the use of monetary and fiscal policies.