How will a favourable supply shock shift short-run aggregate supply, and how will output change?
A) It will shift short-run aggregate supply left, making output rise.
B) It will shift short-run aggregate supply left, making output fall.
C) It will shift short-run aggregate supply right, making output rise.
D) It will shift short-run aggregate supply right, making output fall.

Question

Quizplus · Accepted Answer

A favourable supply shock will shift short-run aggregate supply to the right, as it increases the availability of inputs and reduces production costs. This shift will lead to an increase in output, as firms are able to produce more goods and services at a lower cost.

How Will a Favourable Supply Shock Shift Short-Run Aggregate Supply