A negative supply shock often results in:
a) a leftward shift of the AD curve.
b) an increase in the aggregate price level and a decrease in aggregate output.
c) no change in the price level.
d) a drop in the unemployment levels.
Ans: b) an increase in the aggregate price level and a decrease in aggregate output.
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A two-firm oligopoly is called a
A) double monopoly. B) cartel. C) duopoly. D) monopolistic oligopoly. E) dual-market.
Consider an economy in a long-run equilibrium with Y = 40 and ? = 3. A demand shock in period one causes output to rise to 45 and inflation rises to 4
Then, the updating of expected inflation to equal 4 causes output in period two to decline to 43.85, and inflation to rise to 4.77. Assuming no further shocks, calculate the values of output and inflation for period three.