A negative supply shock from rising input prices shifts
A) both the SAS and AD curves leftward.
B) both the SAS and LAS curves leftward.
C) the SAS curve leftward but leaves the LAS curve unchanged.
D) the LAS curve leftward but leaves the SAS curve unchanged.
E) both the SAS and LAS curves rightward.

Question

Quizplus · Accepted Answer

A negative supply shock from rising input prices will shift the SAS (short-run aggregate supply) curve leftward. However, it will not affect the LAS (long-run aggregate supply) curve, as the LAS curve is determined by potential output and is not influenced by short-term changes in prices or production costs. Therefore, choice C is the correct answer.

A Negative Supply Shock from Rising Input Prices Shifts