An adverse aggregate supply shock could result from
A) a sharp rise in productivity.
B) a rapid rise in oil prices.
C) a decline in wages.
D) an appreciation of the dollar.

Question

Quizplus · Accepted Answer

An adverse aggregate supply shock is characterized by a sudden increase in the cost of production or a decrease in the availability of key inputs. An example of this would be a rapid rise in oil prices, which would increase the cost of producing goods and services across the economy. Therefore, choice B is the correct answer. The other choices are not consistent with an adverse aggregate supply shock. A sharp rise in productivity (choice A) would lead to an increase in aggregate supply. A decline in wages (choice C) would reduce production costs and increase aggregate supply. An appreciation of the dollar (choice D) would make imports cheaper and reduce the cost of production, leading to an increase in aggregate supply.

An Adverse Aggregate Supply Shock Could Result from