When the Economy Experiences a Permanent Supply Side Shock That

question 123

Multiple Choice

When the economy experiences a permanent supply side shock that shifts the long-run aggregate supply curve to the right, the short-run aggregate supply curve will:

• A) instantly shift to the left to a new long-run equilibrium.
• B) shift to the left initially, and then over time be pulled rightward toward the long-run aggregate supply.
• C) gradually shift to the right until it reaches long-run aggregate supply and the new long-run equilibrium.
• D) None of these are true.

---

Definitions:

Binomial Random Variable

A type of random variable that follows the binomial distribution, representing the number of successes in a fixed number of independent trials, each with the same probability of success.

Discrete Random Variable

A variable that can take on a countable number of distinct values, often representing the outcomes of some random process.

Binomial Distribution

A probability distribution that summarizes the likelihood that a value will take one of two independent values under a given set of parameters or conditions.

Binomial Probability Distribution

A probability distribution that summarises the likelihood that a value will take one of two independent values under a given set of parameters or assumptions.