An adverse supply shock will shift short-run aggregate supply
A)right, making prices rise.
B)left, making prices rise.
C)right, making prices fall.
D)left, making prices fall.

Question

Quizplus · Accepted Answer

An adverse supply shock, such as a sudden increase in oil prices, decreases the quantity of goods and services that businesses are willing to supply at any given price level, shifting the short-run aggregate supply curve to the left. This results in higher prices for goods and services, as the reduced supply meets the existing demand.

An Adverse Supply Shock Will Shift Short-Run Aggregate Supply