Final answer:
The statement is false; supply shocks refer to unexpected events that influence a firm's supply, not changes in spending. Factors like input costs and new technologies affect a firm's cost of production and influence the amount supplied. Decreased production costs can increase supply, shown by a supply curve moving rightward. The correct option is b.
Step-by-step explanation:
The statement that changes in spending cause firms to change their level of production of goods and services are called supply shocks is false. Supply shocks refer to unexpected events that affect supply, while changes in spending are more related to shifts in demand.
Factors such as changes in the cost of inputs, natural disasters, new technologies, and government decisions directly affect the cost of production for firms and consequently how much they are willing to supply at any given price.
If a firm's production costs decrease and the selling price of their product remains constant, profits increase, which motivates the firm to supply more of the product. This scenario is represented by a rightward shift in the supply curve.
Hence, Option b is correct.