-In the figure above, a ________ supply shock will shift the aggregate supply curve to AS₂ and the economy will return to the long run equilibrium at point ________.

Question

-In the figure above, a ________ supply shock will shift the aggregate supply curve to AS<sub>2</sub> and the economy will return to the long run equilibrium at point ________. A) negative; 1 B) negative; 3 C) positive; 1 D) positive; 3

Quizplus · Accepted Answer

A negative supply shock will shift the aggregate supply curve to the left, from AS1 to AS2. This will cause the price level to rise and output to fall, moving the economy to point 1. In the long run, the economy will return to its original equilibrium at point 3, as the negative supply shock is assumed to be temporary.

-In the Figure Above, a ________ Supply Shock Will Shift