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Refer to Figure 24-4. The initial effect of a positive AS shock results in ________.

A) an inflationary output gap of 550
B) a recessionary output gap of 250
C) an inflationary output gap of 300
D) an inflationary output gap of 200
E) a recessionary output gap of 450

User Boomboxboy
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1 Answer

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Final answer:

The initial effect of a positive AS shock typically results in increased output without inflation, which does not align with the options given for an inflationary or recessionary output gap.

Step-by-step explanation:

Without Figure 24-4, it is not possible to determine the answer to the question about the initial effect of a positive AS shock specifically. However, based on the information provided, which explains that a decrease in energy prices or a positive supply shock would lead to a shift of the Aggregate Supply (AS) curve to the right, resulting in more real GDP at a lower price level, we can infer the general effects of such shock. It would generally result in a reduction in unemployment and a lower rate of inflation, consistent with a movement down the Phillips curve towards the origin. A recessionary gap is typically associated with situations where the real GDP is below potential GDP, which is not the scenario described by a positive AS shock. Therefore, an inflationary gap would not be the initial effect of a positive AS shock; rather, it could lead to increased output without inflation, contradicting the concepts of an inflationary or recessionary gap.

User Harsh Sharma
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