Figure 22-8. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate." -Refer to Figure 22-8. The shift of the aggregate-supply curve from AS₁ to AS₂ A)results in a more favorable trade-off between inflation and unemployment. B)results in a more favorable trade-off between inflation and the growth rate of real GDP. C)represents an adverse shock to aggregate supply. D)represents a favorable shock to aggregate supply.

Question

Quizplus · Accepted Answer

An adverse shock to aggregate supply shifts the aggregate-supply curve to the left, resulting in higher prices and lower output.