Final answer:
A negative supply shock that raises production costs will result in the aggregate supply curve to shift up. An upward shift in aggregate supply due to increased costs causes the inflation rate to rise and output to fall initially. Ultimately, unless there are changes to demand or continued supply shifts, the inflation rate and output may remain unchanged.
Step-by-step explanation:
A negative supply shock that raises production costs will cause the aggregate supply curve to shift up. Specifically, this shock results in a decrease in supply, which would be shown as a shift to the left on a graph where the aggregate supply (AS) curve is positioned. Hence, the correct answer to the first part of the question is (d) aggregate supply curve to shift up.
For the second part, an upward shift in aggregate supply would be unusual as that implies an increase in total production at all price levels, which is not characteristic of a negative supply shock. However, if the question is referring to the effects of an upward shift in the cost of production (shift up/left of the AS curve), it initially causes the inflation rate to rise and output to fall, which is option (a).
In the long run, an increase in production costs without any change in demand could lead to a situation where the economy adjusts and the inflation rate remains unchanged while output also remains unchanged, assuming there's no further intervention or shocks affecting demand or supply. But if we considered an upward shift of the AS curve as being an increase in productive efficiency (a positive supply shock), the result would be option (b), the inflation rate to fall and output to rise.