A negative supply shock will

Question

a. Shift the Phillips Curve to the left

b. Shift the money supply curve to the left

c. Shift the Phillips Curve to the right

d. Shift the investment demand curve to the right

e. Shift the money demand curve to the right

Answer 1

A negative supply shock is the same thing as Stagflation (a leftward shift of the SRAS curve).

Stagflation shows the PL increasing and Output decreasing while increasing unemployment.

The only way to show the PL (Inflation) increasing and unemployment increasing is a rightward shift of the SR Phillips Curve.