In 2005 hurricane Katrina devastated large portions of the Gulf Coast economy.Many refineries went offline disrupting oil refining and distribution.What do you think was a likely result?
A)the restricted supply constituted a cost push shock that would have shifted the long run AS curve to the right
B)the restricted supply constituted a cost push shock that would have shifted the short run AS curve to the left
C)the restricted supply constituted a cost push shock that would have meant an upward movement along the Phillips curve
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

The disruption in oil refining and distribution caused by Hurricane Katrina led to a reduced supply of oil, thereby increasing production costs for firms. This cost push shock would shift the short run AS curve to the left, resulting in higher prices and lower output levels in the economy. The other options (A, C, D, and E) are not accurate in describing the likely result of the hurricane's impact on the Gulf Coast economy.

In 2005 Hurricane Katrina Devastated Large Portions of the Gulf