Compared to an Initial Long-Run Equilibrium, an Aggregate Supply Shock

question 140

Multiple Choice

Compared to an initial long-run equilibrium, an aggregate supply shock that reduces potential output results in a(n) ________ gap in the short run and ________ output and ________ inflation in the long run.

• A)recessionary; lower; higher
• B)expansionary; lower; higher
• C)expansionary; higher; higher
• D)recessionary; potential; higher

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Definitions:

Society

A group of individuals involved in persistent social interaction, or a large social group sharing the same geographical or social territory.

Industrialization

The process by which an economy is transformed from primarily agricultural to one based on the manufacturing of goods, involving widespread technological innovation.

Marx

Karl Marx, a 19th-century philosopher, economist, and revolutionary socialist known for his theories about capitalism and communism.

Consequences

The outcomes or results that naturally follow from an action or condition, affecting how situations unfold.