What would NOT be associated with an adverse supply shock?
A) short-run Phillips curve shifts right
B) unemployment rises
C) price level falls
D) output falls

Question

Quizplus · Accepted Answer

If there is an adverse supply shock, it would lead to a decrease in the availability of inputs or an increase in the cost of production, leading to a decrease in output and an increase in prices. Therefore, the price level would not fall as a result of an adverse supply shock, making option C the correct answer. The other options - A, B, and D - are all associated with adverse supply shocks.

What Would NOT Be Associated with an Adverse Supply Shock