A Major Adverse Aggregate Supply Shock

question 97

Multiple Choice

A major adverse aggregate supply shock:

• A)automatically shifts the aggregate demand curve rightward.
• B)causes the Phillips Curve to shift outward.
• C)can be caused by rising productivity.
• D)can be caused by falling wages.

---

Definitions:

Allocative Efficiency

A state of the economy in which production represents consumer preferences; in other words, every good or service is produced up to the point where the last unit provides a utility equal to its cost of production.

Technological Advance

The progress or development in technology, leading to new products, processes, or systems.

Preferred Mix

The optimal combination or assortment of goods, services, investments, or resources desired by an individual, firm, or economy.

Inverted-U Theory

A concept suggesting that there is an optimum level of a variable, beyond which its effect begins to decline or become negative, often applied to the relationship between income inequality and economic development.