A favorable supply shock will shift short-run aggregate supply
A)left,making output rise.
B)left,making output fall.
C)right,making output rise.
D)right,making output fall.

Question

Quizplus · Accepted Answer

A favorable supply shock will increase the availability of inputs, such as lower energy or commodity prices, leading to a decrease in production costs for firms. As a result, firms can increase output without needing to raise prices for their goods and services. This increases short-run aggregate supply (SRAS) and shifts it to the right, leading to an increase in output and a decrease in prices. Therefore, the correct answer is C, which indicates that a favorable supply shock will shift SRAS to the right, making output rise.

A Favorable Supply Shock Will Shift Short-Run Aggregate Supply