If a Natural Disaster Causes a Negative Long-Run Supply Shock

question 134

Multiple Choice

If a natural disaster causes a negative long-run supply shock to the economy, the new equilibrium will occur at a _______ price level and _______ level of output once the economy adjusts.

• A) higher; lower
• B) lower; higher
• C) higher; higher
• D) lower; lower

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Definitions:

Margin Of Safety

The difference between actual or expected sales and sales at the break-even point; it measures the risk of incurring a loss.