Final answer:
A positive supply shock causes the aggregate supply curve to shift to the right, resulting in more real GDP at a lower price level, ultimately moving the economy from point A to point B and potentially to point C over time. The correct option is (D).
Step-by-step explanation:
If the economy starts at point A and a positive supply shock occurs, what would be the trajectory of this economy over time? A positive supply shock would cause the aggregate supply (AS) curve to shift out to the right.
This shift would lead to more real GDP at a lower price level, which would also shift the Phillips curve down toward the origin. Hence, the economy would experience lower unemployment and a lower rate of inflation as a result of the supply shock.
The process would typically move the economy from point A to point B due to the immediate effects of the supply shock.
Over time, with adjustments in the market, the economy could potentially move to point C if demand patterns shift as well, with business and consumer responses to the new price levels and economic conditions.
This scenario does not describe a rise in aggregate demand (AD), which would be represented by a movement from point A to point E₁ with a shift of the AD curve out to the right. The student is specifically asking about a supply shock, not a demand-side event.