A Negative Supply Shock May Lead To

question 61

Multiple Choice

A negative supply shock may lead to:

• A)an increase in real aggregate output and an increase in the price level.
• B)a reduction in real aggregate output and an increase in the price level.
• C)a reduction in real aggregate output and a decrease in the price level.
• D)an increase in real aggregate output and a decrease in price level.
• E)a reduction in the price level and no change in real aggregate output.

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Definitions:

Rising Prices

A scenario in which the overall price level of goods and services within an economy rises over a certain period.

Ending Inventory

Ending Inventory refers to the total value of goods available for sale at the end of an accounting period, calculated as the sum of beginning inventory plus purchases minus cost of goods sold.

LIFO Method

"Last In, First Out" an inventory costing method that assumes the most recently purchased items are sold first, affecting the cost of goods sold and ending inventory valuations.

Increasing Prices

A situation where the cost of goods or services rises over a period of time, often due to factors like inflation or increased demand.