Assume that the government decides to stimulate production by reducing the taxes on businesses. How does this policy action affect the short-run aggregate supply curve and the aggregate output?

The short-run aggregate supply curve shifts rightward, increasing the aggregate output.

The short-run aggregate supply curve shifts leftward, increasing the aggregate output.

The short-run aggregate supply curve shifts rightward, decreasing the aggregate output.

The short-run aggregate supply curve does not change because of the wage and price rigidity assumption.

The short-run aggregate supply curve shifts leftward, decreasing the aggregate output.