What is the short-run effect of a temporary supply shock?
A) The level of in?ation will be lower while output increases.
B) The level of output and in?ation both increase.
C) The level of in?ation will be higher but output remains the same.
D) The level of in?ation will be higher while output declines.

Question

Quizplus · Accepted Answer

A temporary supply shock typically leads to higher prices as the cost of production increases, which can reduce the quantity of goods produced. This results in higher inflation and lower output in the short run.

What Is the Short-Run Effect of a Temporary Supply Shock