A permanent supply shock _______ potential output. A temporary supply shock shifts the short-run aggregate supply schedule, and _____________ potential output.

Question

Quizplus · Accepted Answer

A permanent supply shock changes potential output because it alters the economy's ability to produce goods and services in the long term. A temporary supply shock shifts the short-run aggregate supply schedule but does not change potential output, as the economy's long-term productive capacity remains unchanged.

A Permanent Supply Shock _______ Potential Output