Question

If the costs of health insurance paid by employers decrease, then the economy will experience a _____ shock. Please choose the correct answer from the following choices, and then select the submit answer button. Answer choices negative demand negative supply positive demand positive supply

Answer 1

Answer: The correct answer is POSITIVE SUPPLY.

Explanation: Supply Shock is an even that suddenly results in an unexpected increase or decrease in supply of goods and services. For example, a steep rise or fall in oil prices.

Supply shock is said to be negative when it results in a decrease in supply and positive when it results in an increase in supply.

If the costs of health insurance paid by employers decrease, it shifts the short-run aggregate supply curve to the right making it a POSITIVE SUPPLY.

Answer 2

The correct answer is letter "D": positive supply.

Step-by-step explanation:

A supply shock occurs when an unexpected event changes the supply of a good or service which changes the price of that product. When the supply shock is positive, the supply increases and the price decreases. If the supply is negative, the supply decreases and the prices increase.

Thus, if the costs of health insurance decrease, expecting an increase in the supply in health insurance, the supply shock will be considered positive.