Which of the following is the best example of a supply shock?
A) an increase in the availability of capital and machinery due to normal changes in business investment
B) a decrease in the productivity of the labor force due to a decline in the average educational level of workers
C) a decline in agricultural output due to a summer drought
D) an increase in output as a result of an expansion in employment

Question

Quizplus · Accepted Answer

A supply shock refers to a sudden and unexpected event that disrupts the supply of goods and services, leading to a change in their prices. In this case, the summer drought can lead to a significant decrease in the agricultural output, which can impact the supply of food and other agricultural products, leading to higher prices. Options A and D refer to normal changes in business investment and employment, respectively, and do not represent sudden and unexpected events. Option B refers to a decline in productivity, which can lead to a decrease in output and higher prices, but it is not a sudden and unexpected event, but rather a gradual process that may be influenced by various factors like education, training, and technology.

Which of the Following Is the Best Example of a Supply