Figure 24-1
-In Figure 24.1 above,a ________ supply shock will shift the aggregate supply curve to AS2 and the economy will return to the long run equilibrium at point ________.
A) negative; 1
B) negative; 3
C) positive; 1
D) positive; 3

Question

Figure 24-1 
-In Figure 24.1 above,a ________ supply shock will shift the aggregate supply curve to AS2 and the economy will return to the long run equilibrium at point ________.
A) negative; 1 
B) negative; 3 
C) positive; 1 
D) positive; 3

Quizplus · Accepted Answer

A negative supply shock will shift the aggregate supply curve to the left from AS1 to AS2. This will result in a higher price level (P2) and a lower level of output (Y2). The economy will return to the long-run equilibrium at point 1, where the aggregate demand curve intersects with the new aggregate supply curve (AS2) at a lower level of output and a higher price level than the original long-run equilibrium at point E.

Figure 24-1 -In Figure 24.1 Above,a ________ Supply Shock Will Shift the Will