A negative real shock causes the economy's:
A) AD and SRAS curves to shift inward.
B) AD and LRAS curves to shift inward.
C) SRAS and LRAS curves to shift inward.
D) AD curve only to shift inward.

Question

Quizplus · Accepted Answer

A negative real shock reduces the economy's productive capacity, causing both the Short-Run Aggregate Supply (SRAS) and Long-Run Aggregate Supply (LRAS) curves to shift inward.

A Negative Real Shock Causes the Economy's