Answer to Question #251205 in Financial Math for Millicent

Question

Assuming aggregate demand remains constant, supply shocks that cause a leftward shift in the aggregate supply curve will------.

Select one:

a. increase both prices and the rate of unemployment

b. decrease the rate of unemployment

c. increase real output

d. decrease prices

Answer 1

Assuming aggregate demand remains constant, supply shocks that cause a leftward shift in the aggregate supply curve will increase both prices and the rate of unemployment.

So, the correct answer is a.