Figure 15-3

-Refer to Figure 15-3.Suppose the economy is at point A.If the economy experiences a negative supply shock,where will the eventual short-run equilibrium be?
A) A
B) B
C) C
D) D

Question

Figure 15-3
 
-Refer to Figure 15-3.Suppose the economy is at point A.If the economy experiences a negative supply shock,where will the eventual short-run equilibrium be?
A) A 
B) B 
C) C 
D) D

Quizplus · Accepted Answer

A negative supply shock will cause an increase in the price level and a decrease in output. This will cause the aggregate demand curve to shift leftward. The new short-run equilibrium will be at the intersection of the new aggregate demand curve and the short-run aggregate supply curve, which is point B.

Figure 15-3 -Refer to Figure 15-3.Suppose the Economy Is at Point A.If