Aggregate supply shocks cause the price level and real GDP to change in
A)opposite directions with price changing by less than output.
B)the same direction with price changing by more than output.
C)opposite directions but by the same amount.
D)opposite directions but not necessarily by the same amount.
E)the same direction and by the same amount.

Question

Quizplus · Accepted Answer

Aggregate supply shocks, such as changes in production costs or availability of resources, typically lead to changes in real GDP and prices in opposite directions. However, the magnitude of the changes may not necessarily be the same, as the degree of price stickiness in the economy can vary. In some cases, prices may change more than output, while in others the opposite may be true. Therefore, choice D is the most accurate answer.

Aggregate Supply Shocks Cause the Price Level and Real GDP