What is the effect of a temporary decrease in the availability of raw materials?
A) Aggregate supply shifts right.
B) Output falls in the short run.
C) Prices fall in the short run.
D) Long-run aggregate supply shifts to the left.

Question

Quizplus · Accepted Answer

With a temporary decrease in the availability of raw materials, output (i.e. production) would fall in the short run as firms would face difficulty in acquiring the necessary inputs to produce goods and services. This would cause a temporary decrease in aggregate supply, as firms would produce less at any given price level. However, in the long run, firms can adjust their input mix and production processes to account for the shortage, so the long-run aggregate supply curve would not shift to the left permanently. Prices may or may not fall depending on the extent to which supply falls relative to demand.

What Is the Effect of a Temporary Decrease in the Availability