What effect will a negative supply shock have on the main measures of economic performance?
A)Real GDP will increase, inflation will increase, and unemployment will decrease.
B)Real GDP will decrease, inflation will decrease, and unemployment will increase.
C)Real GDP will decrease, inflation will increase, and unemployment will increase.
D)Real GDP will increase, inflation will decrease, and unemployment will decrease.

Question

Quizplus · Accepted Answer

A negative supply shock reduces the aggregate supply, leading to lower real GDP, higher inflation (due to increased production costs), and higher unemployment.

What Effect Will a Negative Supply Shock Have on the Main