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Exhibit: Supply Shock
-(Exhibit: Supply Shock) Assume that the economy is at point E. With no further shocks or policy moves, the economy in the long run will be at point:
A) A.
B) B.
C) C.
D) D.

Question

Use the following to answer questions :
Exhibit: Supply Shock 
-(Exhibit: Supply Shock) Assume that the economy is at point E. With no further shocks or policy moves, the economy in the long run will be at point:
A) A. 
B) B. 
C) C. 
D) D.

Quizplus · Accepted Answer

The economy will move to point A in the long run because the supply shock will shift the aggregate supply curve to the left, causing the price level to rise and output to fall.

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