A beneficial supply shock such as a breakthrough in technology _____
A) permanently shifts both the short-run and the long-run aggregate supply curves to the right.
B) temporarily shifts both the short-run and the long-run aggregate supply curves to the right.
C) permanently shifts both the short-run and the long-run aggregate supply curves to the left.
D) temporarily shifts both the short-run and the long-run aggregate supply curves to the left.
E) has no effect on either the long-run or the short-run aggregate supply curves.

Question

Quizplus · Accepted Answer

A beneficial supply shock such as a breakthrough in technology permanently shifts both the short-run and the long-run aggregate supply curves to the right, increasing the potential output of the economy. This leads to lower inflation and higher real GDP in the long run.

A Beneficial Supply Shock Such as a Breakthrough in Technology