On the aggregate supply curve, an increase in inflation causes ________, while a price shock causes ________.
A) upward movement along the curve; the curve to shift
B) downward movement along the curve; the curve to shift
C) the curve to shift; movement along the curve
D) downward movement along the curve; upward movement along the curve
E) Not enough information is given.

Question

Quizplus · Accepted Answer

An increase in inflation typically results in an upward movement along the aggregate supply curve, reflecting higher prices for goods and services. A price shock, such as a sudden increase in oil prices, can cause the aggregate supply curve to shift, indicating a change in the cost of production that affects the overall supply at all price levels.

On the Aggregate Supply Curve, an Increase in Inflation Causes