In the short run, a supply shock that shifts the short-run aggregate supply curve leftward raises the price level and decreases real GDP.

Question

Quizplus · Accepted Answer

A leftward shift in the short-run aggregate supply curve indicates a decrease in the total supply of goods and services at any given price level, leading to higher prices (inflation) and lower output (decrease in real GDP), as the economy adjusts to the supply shock.

In the Short Run, a Supply Shock That Shifts the Short-Run