An increase in aggregate supply during an economic recovery will always lead to a decrease in real interest rates and inflationary expectations among firms and workers.

An increase in aggregate supply means that the overall production of goods and services in the economy is rising. When this happens during an economic recovery, it often results in lower prices for those goods and services, which can help reduce inflationary expectations. As prices stabilize or decrease, both firms and workers may feel less pressure to demand higher wages or raise prices, leading to lower real interest rates. For example, if a factory produces more cars than before, the increased supply can lead to lower car prices, making it less likely for people to expect prices to rise in the future. Therefore, during a recovery, as supply increases, it can lead to a more stable economic environment with lower interest rates and inflation expectations.