Question

In: Economics

Which of the following is correct if there is a favorable supply shock? a. the short-run...

Which of the following is correct if there is a favorable supply shock?

a.

the short-run aggregate supply curve and the short-run Phillips curve both shift right.
b.

the short-run aggregate supply curve and the short-run Phillips curve both shift left.
c.

the short-run aggregate supply curve shifts right and the short-run Phillips curve shifts left.
d.

the short-run aggregate supply curve shifts left and the short-run Phillips curve shifts right.

Solutions

Expert Solution

Option c

the short-run aggregate supply curve shifts right and the short-run Phillips curve shifts left

The positive supply shock increases the supply in short run which increases inflation and that shifts the short-run Phillips curve shifts left.

Rahul Sunny answered 3 years ago
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