Which of the following would be classified as a negative supply shock?
A)An increase in the price of oil
B)An increase in government purchases
C)An increase in export demand
D)Either an increase in the price of oil or an increase in government purchases

Question

Quizplus · Accepted Answer

A negative supply shock is a sudden decrease in the supply of goods and services, leading to an increase in their prices. An increase in the price of oil is an example of a negative supply shock as it increases the cost of producing goods and services that require oil as an input. An increase in government purchases or export demand would increase the demand for goods and services, which could lead to higher prices, but it is not a supply shock. Therefore, only option A is a negative supply shock.

Which of the Following Would Be Classified as a Negative