If there is a favourable supply shock, what will most likely happen?
A) The aggregate supply curve and the short-run Phillips curve will both shift right.
B) The aggregate supply curve and the short-run Phillips curve will both shift left.
C) The aggregate supply curve will shift right, and the short-run Phillips curve will shift left.
D) The aggregate supply curve will shift left, and the short-run Phillips curve will shift right.

Question

Quizplus · Accepted Answer

A favorable supply shock, such as a decrease in the price of oil, typically increases the aggregate supply in an economy, shifting the aggregate supply curve to the right. This leads to lower prices and lower unemployment, which is represented by a leftward shift in the short-run Phillips curve.

If There Is a Favourable Supply Shock, What Will Most