Figure 8-6

-In Figure 8-6 above,an adverse supply shock accompanied by a neutral policy take us along path

Question

Figure 8-6
 
-In Figure 8-6 above,an adverse supply shock accompanied by a neutral policy take us along path

Quizplus · Accepted Answer

An adverse supply shock shifts the short-run aggregate supply curve to the left, resulting in higher prices and lower output. With neutral policy, the aggregate demand curve remains unchanged. Therefore, the economy moves from point E to point H along the short-run aggregate supply curve.

Figure 8-6 -In Figure 8-6 Above,an Adverse Supply Shock Accompanied by a Shock