A supply shock is defined as a(n):
A) decrease in full employment output.
B) surprise event that changes the firm's production costs.
C) reduction in aggregate demand that has a negative impact on the firm's revenue.
D) sudden upward movement along the short-run aggregate supply curve.
E) attempt by employees to negotiate a wage increase.

Question

Quizplus · Accepted Answer

A supply shock refers to a surprise event that changes the firm's production costs. This could be an increase or decrease in the cost of raw materials, labor, or other inputs that the firm needs to produce its goods or services. This can cause a shift in the short-run aggregate supply curve, which affects the price level and output level in the economy.

A Supply Shock Is Defined as A(n)