When the economy experiences a permanent supply side shock that shifts the long-run aggregate supply to the right, the short run aggregate supply curve will:

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In the short run, the economy will initially operate at a point of excess supply, with prices and output both decreasing. However, over time, firms will adjust their production processes and reduce their costs to take advantage of the new technology or resources, causing the short-run aggregate supply curve to shift rightwards. It will continue to shift rightwards until it reaches the new long-run equilibrium, where both output and prices will be higher than before the supply shock.

When the Economy Experiences a Permanent Supply Side Shock That