If a positive permanent supply shock were to occur, the resulting equilibrium would be a:
A) higher level of output and prices.
B) lower level of output and prices.
C) higher level of output at lower prices.
D) lower level of output at higher prices.

Question

Quizplus · Accepted Answer

A positive permanent supply shock would shift the aggregate supply curve to the right, resulting in a higher level of output and lower prices in the long run, according to the AD-AS model. So, option C is the correct choice as it describes a higher level of output at lower prices.

If a Positive Permanent Supply Shock Were to Occur, the Resulting