An example of an aggregate supply shock is
A) inflation caused by a surge in demand.
B) the reduction of oil supply by the OPEC nations in the early 1970s.
C) the increase in the labor force due to the baby-boomer generation reaching working age.
D) the increase in ice-cream sales every summer.

Question

Quizplus · Accepted Answer

The reduction of oil supply by the OPEC nations is an example of an aggregate supply shock because it caused a significant increase in the cost of production for many industries that relied on oil or oil-based products. This resulted in higher prices for goods and services, reduced output, and higher unemployment rates. In contrast, choices A, C, and D are not examples of aggregate supply shocks as they do not involve sudden changes in the cost of production or supply-side factors that affect the economy's productive capacity.

An Example of an Aggregate Supply Shock Is