If prices and wages are not flexible,an adverse supply shock is most likely to be followed by
A)a rightward shift of the aggregate supply curve
B)a rightward shift of the aggregate demand curve
C)a leftward shift of the aggregate supply curve
D)a leftward shift of the aggregate demand curve
E)persistent unemployment

Question

Quizplus · Accepted Answer

If prices and wages are not flexible, an adverse supply shock can lead to persistent unemployment because the economy cannot adjust quickly to the new conditions, leading to prolonged periods of reduced output and employment.

If Prices and Wages Are Not Flexible,an Adverse Supply Shock