According to aggregate demand and supply analysis,the negative supply shocks of 1973-1975 and 1978-1980 had the effect of
A)increasing aggregate output,lowering unemployment,and raising the inflation.
B)decreasing aggregate output,raising unemployment,and raising the inflation.
C)increasing aggregate output,raising unemployment,and raising the inflation.
D)decreasing aggregate output,raising unemployment,and lowering the inflation.

Question

Quizplus · Accepted Answer

Negative supply shocks lead to a decrease in aggregate supply, which shifts the aggregate supply curve to the left. This leads to a decrease in output and an increase in prices, resulting in higher inflation. As a result, unemployment increases, as production costs rise, firms might have to lay off workers or reduce their hours of work. Therefore, option B is the most appropriate answer.

According to Aggregate Demand and Supply Analysis,the Negative Supply Shocks