Suppose There Is a Temporary Supply Shock Because of a War

question 58

Multiple Choice

Suppose there is a temporary supply shock because of a war in the Middle East,then,ceteris paribus,the ensuing cost push shock ________.

• A)would lead to a temporary increase in prices due to a restriction in the supply of oil
• B)would lead to a temporary decrease in output as the AS curve would shift to the left
• C)would lead to a temporary shift in the AS curve but ultimately output and inflation would return to the original long-run values
• D)all of the above
• E)none of the above

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