What is a supply shock, and why might a supply shock lead to stagflation?
What will be an ideal response?
A supply shock is an unexpected event that causes a shift in short-run aggregate supply. An adverse supply shock causes the short-run aggregate supply curve to shift to the left, causing an increase in the price level and a decrease in real GDP. An increase in the price level occurring at the same time as a decrease in real GDP is known as stagflation. A positive supply shock causes the short-run aggregate supply curve to shift to the right, causing a decrease in the price level and an increase in real GDP.
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In the U.S., the employment ratio is highest among ________, and lowest among ________
A) women; both sexes combined B) men; college-educated workers C) women; men D) men; women
If demand is price inelastic, a decrease in price
a. raises total revenue to the seller b. raises total expenditure on the good, but not total revenue to the seller c. reduces total revenue to the seller d. leaves total revenue to the seller unchanged e. leaves total expenditure on the good unchanged