What does a leftward shift in the short-run aggregate supply curve typically indicate?

A leftward shift in the short-run aggregate supply curve is typically associated with a decrease in the overall supply of goods and services in the economy, which often results from higher production costs, including wages and prices for raw materials. This shift can lead to inflationary pressures, as the reduced supply while demand remains constant usually causes prices to rise. When producers face increased costs, they may reduce the quantity they are willing to supply at existing price levels, leading to upward pressure on prices, hence the connection to inflation.

The other choices do not accurately reflect the implications of a leftward shift. Increased production capacity and decreased wage costs would generally cause a rightward shift in aggregate supply, which would increase supply rather than decrease it, and economic stabilization typically aligns with maintaining equilibrium in the market, often achieved by reducing inflation, not contributing to it.