Question

A negative supply shock in the short run causes
A) the aggregate supply curve to shift to the left B) unemployment to fall C) the aggregate supply curve to shift to the right D) the price level to fall

Answer 1

Answer:

In the short run, an economy-wide negative supply shock will shift the aggregate supply curve leftward, decreasing the output and increasing the price level. ... A supply shock can cause stagflation due to a combination of rising prices and falling output.