A temporary supply shock,such as a bumper crop,would
A)shift the FE line to the right and leave the IS curve unchanged.
B)shift the FE line to the left and shift the IS curve up and to the right.
C)shift the FE line to the left and leave the IS curve unchanged.
D)have no effect on the FE line.

Question

Quizplus · Accepted Answer

A temporary supply shock, such as a bumper crop, will increase the production and decrease the price level, thus shifting the FE line to the right. However, it will not affect the demand side of the economy, represented by the IS curve, so it will remain unchanged.

A Temporary Supply Shock,such as a Bumper Crop,would