A supply shock causes a shift in
A) short-run aggregate supply.
B) aggregate demand.
C) aggregate demand and short-run aggregate supply.
D) long-run aggregate supply.
E) short-run and long-run aggregate supply.

Question

Quizplus · Accepted Answer

A supply shock is an unexpected event that disrupts the supply of goods and services in an economy. As a result, it causes a shift in the short-run aggregate supply curve, which is a curve that represents the relationship between the price level and the quantity of real GDP supplied in the short run. The shift can be either to the left (decrease in supply) or to the right (increase in supply), depending on the nature and severity of the shock. The other options (B, C, D, and E) are not affected directly by a supply shock, although they can be indirectly affected through their impact on output, prices, and other macroeconomic variables.

A Supply Shock Causes a Shift in