Aggregate supply shocks cause the price level and real GDP to change in
A)the same direction with price changing by more than output.
B)the same direction and by the same amount.
C)opposite directions with price changing by less than output.
D)opposite directions but not necessarily by the same amount.
E)opposite directions but by the same amount.

Question

Quizplus · Accepted Answer

Aggregate supply shocks can cause the price level and real GDP to move in opposite directions. For example, a negative supply shock such as an increase in the cost of inputs can cause a decrease in output and an increase in prices. However, the magnitude of the change in price and output may not necessarily be the same.

Aggregate Supply Shocks Cause the Price Level and Real GDP