Final answer:
An adverse aggregate supply shock causes stagnation in economic growth and inflation, known as stagflation, by shifting the aggregate supply curve to the left. Increased productivity would shift the AS curve to the right, leading to positive economic effects, and would thus not cause an adverse supply shock. The Phillips curve would shift downward toward the origin with lower inflation and unemployment, not in response to an adverse supply shock.
O causes the phillips curve to shift leftward and downward.
Step-by-step explanation:
An adverse aggregate supply shock can cause a problematic scenario known as stagflation, which is characterized by stagnant economic growth and rising inflation. This occurs when the aggregate supply (AS) curve shifts to the left, leading to higher prices and lower output. An example of such a shock could be an unexpected early freeze in agricultural sectors, destroying crops and reducing the amount of agricultural products available, thus shifting the AS curve to the left. This results in fewer goods being available at any given price level, causing higher prices and lower production levels.
In contrast, a boost in the rate of growth of productivity typically causes the AS curve to shift to the right, which can lead to higher output, lower unemployment, and lower inflation rates, an outcome diametrically opposed to the effects of an adverse supply shock. Therefore, it's clear that increased productivity cannot cause an adverse supply shock; rather, it would mitigate such conditions.
Finally, in regards to the Phillips curve, a reduction in the rate of inflation coupled with lower unemployment would be signified by a downward shift toward the origin, not leftward and downward, which is contrary to the adverse effects caused by a negative supply shock. Hence, an adverse supply shock would not automatically shift the aggregate demand (AD) curve rightward nor cause the Phillips curve to shift leftward and downward, but could indeed cause stagflation.