A favourable supply shock causes ________ to ________.
A) aggregate demand; increase
B) aggregate demand; decrease
C) short-run aggregate supply; decrease
D) short-run aggregate supply; increase

Question

Quizplus · Accepted Answer

A favourable supply shock means that the cost of production decreases, leading to an increase in the production of goods and services. This increase in production leads to an increase in short-run aggregate supply (SRAS), as producers are willing to supply more at each price level. Therefore, the correct answer is D, short-run aggregate supply will increase.

A Favourable Supply Shock Causes ________ to ________

A Favourable Supply Shock Causes to