In the above figure, starting at E1, if there is a supply shock that is permanent, the
A) aggregate supply would shift to SRAS1 and LRAS1 would shift to LRAS0.
B) aggregate supply would shift to SRAS1 and LRAS0 would shift to LRAS1.
C) aggregate supply would shift to SRAS2 and LRAS0 would shift to LRAS1.
D) aggregate supply would shift to SRAS1 and then return to SRAS0.
Answer: C) aggregate supply would shift to SRAS2 and LRAS0 would shift to LRAS1.
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A rightward (an outward) shift of a nation's production possibilities curve could be caused by:
a. a decrease in technology. b. an increase in resources. c. producing more consumer and fewer capital goods. d. a decline in the labor force's level of education and skills.
A movement along a consumption function is caused by a change in
a. households' real assets b. interest rates c. taxation policy d. expectations of price changes e. households' incomes