All Else Equal, a Negative Supply Shock

question 75

Multiple Choice

All else equal, a negative supply shock:

• A) causes consumer surplus to increase and producer surplus to decrease.
• B) causes consumer surplus to decrease and producer surplus to increase.
• C) causes both consumer and producer surplus to increase.
• D) causes both consumer and producer surplus to decrease.

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Definitions:

Prospective

Relating to or effective in the future, often used in planning and forecasting scenarios.

Adjusting Entry

A journal entry made in accounting records at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred.

Depreciation Expense

The portion of the cost of a fixed asset that is considered consumed in each period of the asset's useful life.

Retrospective Adjustments

Adjustments made to the financial statements of prior periods when adopting a new accounting principle, as if that principle had always been applied.