The negative supply shock of 2007,compared to the shocks in 1973 & 1979,involved ________.
A)a larger decrease in aggregate demand
B)larger decreases in the real interest rate
C)smaller decreases in aggregate supply
D)larger increases in the real interest rate

Question

Quizplus · Accepted Answer

The negative supply shock of 2007 involved smaller decreases in aggregate supply compared to the shocks in 1973 and 1979, which were caused by oil price increases. The 2007 shock was largely caused by disruptions in the housing market and financial system. The other choices (A, B, and D) are not accurate statements about the differences between the supply shocks.

The Negative Supply Shock of 2007,compared to the Shocks in 1973