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Unformatted text preview: curves. Once the economy reaches this new long-run equilibrium, the price level is changed but output is not. There are two types of supply shocks. Adverse supply shocks include things like increases in oil prices, a drought that destroys crops, and aggressive union actions. In general, adverse supply shocks cause the price level for a given amount of output to increase. This is represented by a shift of the short-run aggregate supply curve to the left. Positive supply shocks include things like decreases in oil prices or an unexpected great crop season. In general, positive supply shocks cause the price level for a given amount of output to decrease. This is represented by a shift of the short-run aggregate supply curve to the right. Figure %: Graph of a positive supply shock in the AS- AD model...
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This note was uploaded on 02/09/2012 for the course ECO ECO2013 taught by Professor Jominy during the Fall '08 term at Broward College.
- Fall '08