What Is the Short-Run Effect of a Temporary Supply Shock

question 100

Multiple Choice

What is the short-run effect of a temporary supply shock?

• A) The level of in?ation will be lower while output increases.
• B) The level of output and in?ation both increase.
• C) The level of in?ation will be higher but output remains the same.
• D) The level of in?ation will be higher while output declines.

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Definitions:

Comparative Advantage

The ability of a party to produce a particular good or service at a lower marginal and opportunity cost than another party.

Cakes

Baked goods that are typically sweet, often layered or decorated, and are usually served on special occasions like birthdays or weddings.

Absolute Advantage

A concept in international trade that occurs when one country can produce a good or service more efficiently than another country, using the same amount of resources.

Wheat

A cereal grain that is cultivated worldwide and serves as a staple food for a large portion of the world's population.