Question

A supply shock is

a. an increase in the rate of inflation as a result of expansionary fiscal​ policy, resulting in a leftward shift of the sras curve.
b. an increase in potential gdp caused by a government expenditure​ multiplier, resulting in a leftward shift of the ad curve.
c. a sudden increase in the price of an important natural​ resource, resulting in a leftward shift of the sras curve.
d. an increase in both the inflation and the unemployment rates that may sometimes result in a rightward shift of the sras curve. stagflation is a ▼ combination of discretionary and automatic fiscal policy combination of inflation and recession situation when the economy reaches full employment automatically . stagflation occurs when ▼ a supply shock shifts the sras to the left, increasing the price level and decreasing actual gdp an increase in productivity produces a sudden jump in real gdp a tax cut causes high rates of inflation along with high unemployment . click to select your answer.

Answer 1

1) A supply shock is a sudden increase in the price of an important natural​ resource, resulting in a leftward shift of the sras curve. Because the change is so sudden it really affects the equilibrium price of the good or service within the economy.

2) Stagflation is a combination of inflation and recession. Stagflation typically occurs because of supply shock.

3) Stagflation occurs when a supply shock shifts the sras to the left, increasing the price level and decreasing actual GDP.