Given the aggregate demand curve, what effects would a beneficial supply shock have on output and price level?
A) Output would decrease, and the price level would increase.
B) Output would decrease, and the price level would decrease.
C) Output would increase, and the price level would decrease.
D) Output would increase, and the price level would increase.

Question

Given the aggregate demand curve, what effects would a beneficial supply shock have on output and price level?  
A) Output would decrease, and the price level would increase. 
B) Output would decrease, and the price level would decrease. 
C) Output would increase, and the price level would decrease. 
D) Output would increase, and the price level would increase.

Quizplus · Accepted Answer

A beneficial supply shock would shift the aggregate supply curve to the right, increasing output and decreasing price level. Therefore, the correct choice would be C which indicates that output would increase and the price level would decrease.

Given the Aggregate Demand Curve, What Effects Would a Beneficial