The answer is (C). This is due to the fact that a negative or unfavorable supply shock will produce a short-term shift to the left of the AS curve.
A country's potential national production or an inflation shock are both examples of an aggregate supply shock. Adverse aggregate supply shocks of both kinds can enhance the likelihood of stagflation for an economy by reducing output, raising inflation, and reducing output. a spike in the global price of natural gas or crude oil, for instance. The short-run aggregate supply curve is shifted by changes in the prices of manufacturing inputs. The short-run aggregate supply curve can also be affected by changes in the capital stock, the stock of natural resources, and the sophistication of technology. This is due to the fact that a negative or unfavorable supply shock will produce a short-term shift to the left of the AS curve. Prices will rise as a result of the AS curve's leftward shift. Inflation and unemployment will rise as a result of the price increase.
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