Question

A supply shock is A. an increase in both the inflation and the unemployment rates that may sometimes result in a rightward shift of the SRAS curve. B. a sudden increase in the price of an important natural​ resource, resulting in a leftward shift of the SRAS curve. C. an increase in potential GDP caused by a government expenditure​ multiplier, resulting in a leftward shift of the AD curve. D. an increase in the rate of inflation as a result of expansionary fiscal​ policy, resulting in a leftward shift of the SRAS curve.

Answer 1

Answer:

Option (B) is correct.

Explanation:

A supply shock is a situation in which the price of the natural resource increases which result in an increase in the cost of production of the goods. This increase in the cost of production of the goods induces the producers to produce less amount of goods which reduces the supply of goods. This will lead to shift the short run supply curve of the goods leftwards and therefore, there is an increase in the price of the goods.