Which of the following is considered a negative supply shock?
A)increasing investment in the economy causes the capital stock to rise
B)an unexpected increase in the price of natural gas
C)a decline in wages
D)an improvement in technology

Question

Quizplus · Accepted Answer

A negative supply shock is an unexpected event that decreases the availability of resources, making it more expensive to produce goods and services. An unexpected increase in the price of natural gas, as stated in option B, would increase the cost of production for many firms, leading to a decrease in their supply. Option A represents an increase in investment, which would have a positive effect on the economy and would be considered a positive supply shock. Option C indicates a decline in wages, which could be either a positive or negative supply shock depending on the cause. Option D represents an improvement in technology, which would lead to increased efficiencies and lower costs of production, also known as a positive supply shock.

Which of the Following Is Considered a Negative Supply Shock