Which of the following is NOT an example of a supply shock?
A)A drought in the Midwest
B)A decline in natural gas prices following discovery of new fields
C)The introduction of a new line of computer-controlled machine tools in manufacturing
D)A substantial increase in federal government spending on medicare

Question

Quizplus · Accepted Answer

A supply shock is an unexpected event that impacts the production or supply of goods and services, leading to a sudden change in prices. A drought in the Midwest (A) would reduce the supply of agricultural products and cause prices to rise. A decline in natural gas prices following discovery of new fields (B) would increase the supply, leading to lower prices. The introduction of a new line of computer-controlled machine tools in manufacturing (C) would increase productivity and lower costs, leading to lower prices. However, a substantial increase in federal government spending on medicare (D) would not directly impact the production or supply of goods and services and is not an example of a supply shock.

Which of the Following Is NOT an Example of a Supply