Which of the following would lead to a positive supply shock?
A) An increase in the money supply.
B) A decrease in taxes.
C) The discovery of a more efficient production method.
D) An increase in consumer confidence.
E) An increase in energy prices.

Question

Quizplus · Accepted Answer

The discovery of a more efficient production method would lead to a positive supply shock as it would increase the productivity and output of goods, leading to a shift rightwards in the supply curve.

Note: A, B, D and E are not the correct choices. An increase in money supply would lead to inflation and a decrease in purchasing power, moving the economy along the same supply curve. A decrease in taxes would lead to an increase in consumer demand, but not necessarily affect the supply curve. An increase in consumer confidence would also increase demand, but not supply. An increase in energy prices would lead to a negative supply shock, increasing the cost of production and shifting the supply curve leftwards.

Which of the Following Would Lead to a Positive Supply