A negative real shock causes the LRAS curve to:
A) shift inward.
B) shift outward.
C) become flatter.
D) become steeper.

Question

Quizplus · Accepted Answer

A negative real shock, such as an increase in oil prices, would result in a decrease in the economy's potential output, as production costs rise. This would cause the LRAS curve to shift inward, reflecting the reduced capacity of the economy to produce goods and services in the long run.

A Negative Real Shock Causes the LRAS Curve To