A Favorable Supply Shock

question 11

Multiple Choice

A favorable supply shock

• A)pushes the aggregate demand curve to the right.
• B) shifts aggregate supply to the right.
• Shifts aggregate supply to the left
• C) shifts aggregate demand to the left.
• D)shifts aggregate demand to the right.
• E) has no effect on either the aggregate supply or aggregate demand, only on the quantities supplied and demanded.

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Definitions:

Aggregate Spending

The total spending on goods and services in an economy at a given overall price level and in a given time period.

Marginal Propensity

The ratio of change in an economic variable, such as consumption or saving, to a change in another, like income.

Consumption Spending

The total amount of money spent by households and consumers on durable goods, nondurable goods, and services.

Income

Money received, especially on a regular basis, by an individual or business in exchange for providing labor, goods, or services, or through investing.