A Supply Shock

question 141

Multiple Choice

A supply shock

• A) is usually caused by a change in the money supply
• B) is any event that causes the aggregate supply curve to shift
• C) is any event caused by a change in the price level
• D) is usually good news for the economy
• E) always leads to an increase in the interest rate

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Definitions:

Fixed Cost

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance, remaining constant regardless of the amount of goods or services produced.

Demand Curve

A graph showing the relationship between the quantity of a good that consumers are willing and able to purchase and the price of the good.

Marginal Cost

The hike in cost incurred by generating an additional unit of a good or service.

Profit-Maximizing

This is the process by which a firm decides on the price and output level that returns the maximum profit.