What is the effect of an adverse supply shock?
A) The long-run aggregate supply curve shifts to the left.
B) The short-run aggregate supply curve shifts to the right.
C) The long-run Phillips curve shifts to the left.
D) The short-run Phillips curve shifts to the right.

Question

Quizplus · Accepted Answer

An adverse supply shock, such as a sudden increase in oil prices, typically causes the short-run Phillips curve to shift to the right, indicating higher inflation at every level of unemployment.

What Is the Effect of an Adverse Supply Shock