Figure 15-3

-Refer to Figure 15-3.Suppose the economy is at point A.If the economy experiences a supply shock,where will the eventual short-run equilibrium be?
A)A
B)B
C)C

Question

Figure 15-3
 
-Refer to Figure 15-3.Suppose the economy is at point A.If the economy experiences a supply shock,where will the eventual short-run equilibrium be?
A)A 
B)B 
C)C

Quizplus · Accepted Answer

A negative supply shock will shift the short-run aggregate supply (SRAS) curve leftward, causing higher prices and lower output. In the short-run, the economy will move to a new equilibrium point where the SRAS curve intersects the original aggregate demand (AD) curve at a higher price level and lower output, such as point B. Points A, C, and D are either unattainable or less desirable as they involve lower output and higher prices than the new equilibrium point after the supply shock.

Figure 15-3 -Refer to Figure 15-3.Suppose the Economy Is at Point A.If