A negative supply shock causes:
A)a surplus in consumer markets.
B)demand-pull inflation.
C)a decrease in unexpected inflation.
D)cost-push inflation.

Question

Quizplus · Accepted Answer

A negative supply shock refers to an unexpected event that reduces the supply of goods and services. This could be caused by factors such as natural disasters, trade barriers, or supply chain disruptions. When the supply of goods and services decreases, prices tend to increase due to the mismatch between supply and demand. This is known as cost-push inflation, as the rise in prices is caused by an increase in production costs. Therefore, the best choice is D, which refers to cost-push inflation.

A Negative Supply Shock Causes