How would an adverse supply shock shift the aggregate supply curves?
A) Only the short-run aggregate supply curve would shift outward.
B) Only the long-run aggregate supply curve would shift outward.
C) Only the long-run aggregate supply curve would shift inward.
D) The short-run aggregate supply curve would shift inward, and the long-run aggregate supply curve would shift inward.

Question

How would an adverse supply shock shift the aggregate supply curves?  
A) Only the short-run aggregate supply curve would shift outward. 
B) Only the long-run aggregate supply curve would shift outward. 
C) Only the long-run aggregate supply curve would shift inward. 
D) The short-run aggregate supply curve would shift inward, and the long-run aggregate supply curve would shift inward.

Quizplus · Accepted Answer

An adverse supply shock, such as a sudden increase in oil prices, would cause the cost of production to rise. This leads to a decrease in the quantity of goods and services supplied at any given price level, shifting both the short-run and long-run aggregate supply curves inward.

How Would an Adverse Supply Shock Shift the Aggregate Supply