{"id":432,"date":"2015-05-05T03:39:16","date_gmt":"2015-05-05T03:39:16","guid":{"rendered":"https:\/\/courses.candelalearning.com\/masterymacro1xngcxmaster\/?post_type=chapter&#038;p=432"},"modified":"2018-07-23T16:12:17","modified_gmt":"2018-07-23T16:12:17","slug":"shifts-in-aggregate-supply","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/oldwestbury-wm-macroeconomics\/chapter\/shifts-in-aggregate-supply\/","title":{"raw":"Shifts in Aggregate Supply","rendered":"Shifts in Aggregate Supply"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Objectives<\/h3>\r\n<ul>\r\n \t<li>Explain how productivity growth and changes in input prices change the aggregate supply curve<\/li>\r\n<\/ul>\r\n<\/div>\r\n<h2>Shifts in Aggregate Supply<\/h2>\r\nIn this section we introduce\u00a0<strong>supply shocks.\u00a0<\/strong>Supply shocks are events that shift the aggregate supply curve.\u00a0We defined the AS curve as showing the quantity of real GDP producers will supply at any aggregate price level.\u00a0When the aggregate supply curve shifts to the right, then at every price level, a greater quantity of real GDP is produced. This is called a <strong>positive supply shock<\/strong><strong>.\u00a0<\/strong>When the AS curve shifts to the left, then at every price level, a lower quantity of real GDP is produced. This is a <strong>negative supply shock<\/strong>.\u00a0This module discusses two of the most important supply shocks: productivity growth and changes in input prices.\r\n<div class=\"section\" title=\"How Productivity Growth Shifts the AS Curve\">\r\n<div class=\"titlepage\">\r\n<div>\r\n<div>\r\n<h2 id=\"m48742-ch24mod03_01\"><span class=\"cnx-gentext-section cnx-gentext-t\">How Productivity Growth Shifts the AS Curve<\/span><\/h2>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\nIn the long run, the most important factor shifting the AS curve is <em class=\"glossterm no-emphasis\">productivity growth.\u00a0<\/em>Productivity means how much output can be produced with a given quantity of inputs. One measure of this is output per worker or\u00a0GDP per capita. Over\u00a0time, productivity grows so that the same quantity of labor can produce more output. Historically, the real growth in GDP per capita in an advanced economy like the United States has averaged about 2% to 3% per year, but productivity growth has been faster during certain extended periods like the 1960s and the late 1990s through the early 2000s, or slower during periods like the 1970s. A higher level of productivity shifts the AS curve to the right, because with improved productivity, firms can produce a greater quantity of output at every price level. The interactive graph below (Figure 1) shows an outward shift in productivity over two time periods. The AS curve shifts out from SRAS<sub>0<\/sub> to SRAS<sub>1<\/sub> and LRAS<sub>0<\/sub>\u00a0to LRAS<sub>1<\/sub>,\u00a0reflecting the rise in potential GDP in this economy, and the equilibrium shifts from E<sub>0<\/sub> to E<sub>1<\/sub><sub>.<\/sub>\r\n\r\n<iframe src=\"https:\/\/h5p.org\/h5p\/embed\/240461\" width=\"1090\" height=\"560\" frameborder=\"0\"><\/iframe>\r\n<strong>Figure 1 (Interactive Graph). Shifts in Aggregate Supply. <\/strong>Productivity growth shifts AS to the right.\r\n\r\nA shift in the SRAS curve to the right will result in a greater real GDP and downward pressure on the price level, if aggregate demand remains unchanged. However, productivity grows slowly, at best only a few percentage points per year.\u00a0As a consequence, the resulting shift in SRAS, increase in Q and decrease in P will be relatively small over a few months or even a couple of years.\r\n\r\n<\/div>\r\n<div class=\"section\" title=\"How Changes in Input Prices Shift the AS Curve\">\r\n<div class=\"titlepage\">\r\n<div>\r\n<div>\r\n<h2 id=\"m48742-ch24mod_02\"><span class=\"cnx-gentext-section cnx-gentext-t\">How Changes in Input Prices Shift the AS Curve<\/span><\/h2>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\nHigher prices for inputs that are widely used across the entire economy, such as labor or energy, can have a macroeconomic impact on aggregate supply. Increases in the price of such inputs represent a negative supply shock, shifting the SRAS curve to shift to the left.\u00a0This means that at each given price level for outputs, a higher price for inputs will discourage production because it will reduce the possibilities for earning profits. The interactive graph below (Figure 2) shows the aggregate supply curve shifting to the left, from\u00a0SRAS<sub>0<\/sub> to\u00a0SRAS<sub>1<\/sub>, causing the equilibrium to move from E<sub>0<\/sub> to E<sub>1<\/sub>. The movement from the original equilibrium of E<sub>0<\/sub> to the new equilibrium of E<sub>1<\/sub> will bring a nasty set of effects: reduced GDP or recession, higher unemployment because the economy is now further away from potential GDP, and an inflationary higher price level as well. For example, the U.S. economy experienced recessions in 1974\u20131975, and 1980\u20131981 that were each preceded or accompanied by a rise in oil prices. In the 1970s, this pattern of a shift to the left in AS leading to a stagnant economy with high unemployment and inflation was nicknamed <strong>stagflation<\/strong><i>.<\/i>\r\n\r\n<iframe src=\"https:\/\/h5p.org\/h5p\/embed\/240765\" width=\"1090\" height=\"560\" frameborder=\"0\"><\/iframe>\r\n<strong>Figure 2 (Interactive Graph). Shifts in Aggregate Supply. <\/strong>Higher prices for key inputs shifts AS to the left.\r\n\r\nConversely, a decline in the price of a key input like oil, represents a positive supply shock shifting the\u00a0SRAS curve to the right, providing an incentive for more to be produced at every given price level for outputs. From 1985 to 1986, for example, the average price of crude oil fell by almost half, from $24 a barrel to $12 a barrel. Similarly, from 1997 to 1998, the price of a barrel of crude oil dropped from $17 per barrel to $11 per barrel. In both cases, the plummeting price of oil led to a situation like that presented earlier in\u00a0Figure\u00a01, where the outward shift of\u00a0SRAS to the right allowed the economy to expand, unemployment to fall, and inflation to decline.\r\n<div class=\"textbox tryit\">\r\n<h3>Try It<\/h3>\r\nhttps:\/\/assessments.lumenlearning.com\/assessments\/7522\r\n\r\n<\/div>\r\n<\/div>\r\n<div class=\"section\" title=\"Other Supply Shocks\">\r\n<div class=\"titlepage\">\r\n<div>\r\n<div>\r\n<h2 id=\"m48742-ch24mod03_03\"><span class=\"cnx-gentext-section cnx-gentext-t\">Other Supply Shocks<\/span><\/h2>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\nAlong with wages and energy prices, another source of supply shocks is\u00a0the cost of imported goods that are used as inputs for domestically-produced\u00a0products. In these cases as well, the lesson is that lower prices for inputs cause\u00a0SRAS to shift to the right, while higher prices cause it to shift back to the left.\r\n<div class=\"textbox tryit\">\r\n<h3>Try It<\/h3>\r\nhttps:\/\/assessments.lumenlearning.com\/assessments\/7521\r\n\r\n<\/div>\r\nSimilarly, an unexpected early freeze could destroy a large number of agricultural crops, a shock that would shift the AS curve to the left since there would be fewer agricultural products available at any given price.\r\n<h2><span style=\"color: #333333;\"><strong>When Does A Supply Shock Shift Potential GDP?<\/strong><\/span><\/h2>\r\n<span style=\"color: #333333;\">This important question really answers itself. Suppose there is a decrease in aggregate demand, which is shown by a leftward shift in AD, as shown in Figure 2.\u00a0In the short term, wages are sticky and output decreases along the SRAS, as we move from E<sub>1<\/sub> to E<sub>2<\/sub>. Over time, wages decrease and as they do, the SRAS shifts to the right due to the increase in firms' cost of production. The SRAS continues to shift until GDP has returned to potential. Graphically, we move from E<sub>2<\/sub> to E<sub>3<\/sub>.\u00a0 Because this event was caused by a demand shock (i.e. a shift in AD), it had no effect on potential GDP. The supply of labor didn't change, nor did labor productivity so LRAS stays constant, though SRAS shifted. LRAS shifts only when the potential GDP increases or decreases.<\/span>\r\n\r\n[caption id=\"attachment_11156\" align=\"aligncenter\" width=\"500\"]<img class=\"wp-image-11156\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/2043\/2015\/05\/15070518\/demand_shock1-300x249.png\" alt=\"Graph showing the change in aggregate demand. Price is on the y-axis and real GDP on the x-axis. As the downward sloping AD curve shifts in, the vertica LRAS curve remains the same. SRAS changes in the short term to a lower point in GDP, then shifts down on the LRAS curve, resulting in a lower price by the same real GDP.\" width=\"500\" height=\"415\" \/> <span style=\"color: #333333;\"><strong>Figure 3.<\/strong>\u00a0<strong>A Demand Shock.<\/strong> When AS shifts <em>in response<\/em><em> to<\/em>\u00a0a shift in AD, potential GDP (and LRAS) is unchanged. Rather, the model adjusts back to the original potential GDP, moving from E<sub>1<\/sub> to E<sub>3<\/sub>.<\/span>[\/caption]\r\n\r\n<div class=\"textbox examples\">\r\n<h3>Watch It<\/h3>\r\nReview things that shift aggregate supply in the following video.\r\n\r\n<iframe src=\"https:\/\/www.youtube.com\/embed\/UwAQRnpVMzI?rel=0&amp;start=11\" width=\"800\" height=\"470\" frameborder=\"0\"><\/iframe>\r\n\r\nThe video went over the following scenarios. Take a second look and quiz yourself on what will happen to aggregate supply in each situation.\r\n<ol>\r\n \t<li>A significant increase in nominal wages.\r\n[reveal-answer q=\"193890\"]Show Answer[\/reveal-answer]\r\n[hidden-answer a=\"193890\"]Costs up, AS down[\/hidden-answer]<\/li>\r\n \t<li>An increase in physical capital.\r\n[reveal-answer q=\"468587\"]Show Answer[\/reveal-answer]\r\n[hidden-answer a=\"468587\"]Productivity up, AS up[\/hidden-answer]<\/li>\r\n \t<li>A decrease in corporate taxes on producers.\r\n[reveal-answer q=\"860069\"]Show Answer[\/reveal-answer]\r\n[hidden-answer a=\"860069\"]Production up, AS up[\/hidden-answer]<\/li>\r\n \t<li>An increase in expected inflation.\r\n[reveal-answer q=\"194358\"]Show Answer[\/reveal-answer]\r\n[hidden-answer a=\"194358\"]Costs up, AS down[\/hidden-answer]<\/li>\r\n<\/ol>\r\n<\/div>\r\n<div class=\"textbox tryit\">\r\n<h3>Try It<\/h3>\r\nThese questions allow you to get as much practice as you need, as you can click the link at the top of the first question (\u201cTry another version of these questions\u201d) to get a new set of questions. Practice until you feel comfortable doing the questions.\r\n\r\n[ohm_question]152964-152965-152904-152905[\/ohm_question]\r\n\r\n<\/div>\r\n<div class=\"textbox learning-objectives\">\r\n<h3>glossary<\/h3>\r\n[glossary-page][glossary-term]negative supply shock:[\/glossary-term]\r\n[glossary-definition] a leftward shift in the SRAS and LRAS curves [\/glossary-definition][glossary-term]positive supply shock:[\/glossary-term][glossary-definition] a rightward shift in the SRAS and LRAS curves[\/glossary-definition][glossary-term]stagflation: [\/glossary-term]\r\n[glossary-definition]an economy experiences stagnant growth and high inflation at the same time[\/glossary-definition][glossary-term]supply shock: [\/glossary-term][glossary-definition]an event that shifts both short run and long run aggregate supply curves[\/glossary-definition][\/glossary-page]\r\n\r\n<\/div>\r\n<\/div>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Objectives<\/h3>\n<ul>\n<li>Explain how productivity growth and changes in input prices change the aggregate supply curve<\/li>\n<\/ul>\n<\/div>\n<h2>Shifts in Aggregate Supply<\/h2>\n<p>In this section we introduce\u00a0<strong>supply shocks.\u00a0<\/strong>Supply shocks are events that shift the aggregate supply curve.\u00a0We defined the AS curve as showing the quantity of real GDP producers will supply at any aggregate price level.\u00a0When the aggregate supply curve shifts to the right, then at every price level, a greater quantity of real GDP is produced. This is called a <strong>positive supply shock<\/strong><strong>.\u00a0<\/strong>When the AS curve shifts to the left, then at every price level, a lower quantity of real GDP is produced. This is a <strong>negative supply shock<\/strong>.\u00a0This module discusses two of the most important supply shocks: productivity growth and changes in input prices.<\/p>\n<div class=\"section\" title=\"How Productivity Growth Shifts the AS Curve\">\n<div class=\"titlepage\">\n<div>\n<div>\n<h2 id=\"m48742-ch24mod03_01\"><span class=\"cnx-gentext-section cnx-gentext-t\">How Productivity Growth Shifts the AS Curve<\/span><\/h2>\n<\/div>\n<\/div>\n<\/div>\n<p>In the long run, the most important factor shifting the AS curve is <em class=\"glossterm no-emphasis\">productivity growth.\u00a0<\/em>Productivity means how much output can be produced with a given quantity of inputs. One measure of this is output per worker or\u00a0GDP per capita. Over\u00a0time, productivity grows so that the same quantity of labor can produce more output. Historically, the real growth in GDP per capita in an advanced economy like the United States has averaged about 2% to 3% per year, but productivity growth has been faster during certain extended periods like the 1960s and the late 1990s through the early 2000s, or slower during periods like the 1970s. A higher level of productivity shifts the AS curve to the right, because with improved productivity, firms can produce a greater quantity of output at every price level. The interactive graph below (Figure 1) shows an outward shift in productivity over two time periods. The AS curve shifts out from SRAS<sub>0<\/sub> to SRAS<sub>1<\/sub> and LRAS<sub>0<\/sub>\u00a0to LRAS<sub>1<\/sub>,\u00a0reflecting the rise in potential GDP in this economy, and the equilibrium shifts from E<sub>0<\/sub> to E<sub>1<\/sub><sub>.<\/sub><\/p>\n<p><iframe loading=\"lazy\" src=\"https:\/\/h5p.org\/h5p\/embed\/240461\" width=\"1090\" height=\"560\" frameborder=\"0\"><\/iframe><br \/>\n<strong>Figure 1 (Interactive Graph). Shifts in Aggregate Supply. <\/strong>Productivity growth shifts AS to the right.<\/p>\n<p>A shift in the SRAS curve to the right will result in a greater real GDP and downward pressure on the price level, if aggregate demand remains unchanged. However, productivity grows slowly, at best only a few percentage points per year.\u00a0As a consequence, the resulting shift in SRAS, increase in Q and decrease in P will be relatively small over a few months or even a couple of years.<\/p>\n<\/div>\n<div class=\"section\" title=\"How Changes in Input Prices Shift the AS Curve\">\n<div class=\"titlepage\">\n<div>\n<div>\n<h2 id=\"m48742-ch24mod_02\"><span class=\"cnx-gentext-section cnx-gentext-t\">How Changes in Input Prices Shift the AS Curve<\/span><\/h2>\n<\/div>\n<\/div>\n<\/div>\n<p>Higher prices for inputs that are widely used across the entire economy, such as labor or energy, can have a macroeconomic impact on aggregate supply. Increases in the price of such inputs represent a negative supply shock, shifting the SRAS curve to shift to the left.\u00a0This means that at each given price level for outputs, a higher price for inputs will discourage production because it will reduce the possibilities for earning profits. The interactive graph below (Figure 2) shows the aggregate supply curve shifting to the left, from\u00a0SRAS<sub>0<\/sub> to\u00a0SRAS<sub>1<\/sub>, causing the equilibrium to move from E<sub>0<\/sub> to E<sub>1<\/sub>. The movement from the original equilibrium of E<sub>0<\/sub> to the new equilibrium of E<sub>1<\/sub> will bring a nasty set of effects: reduced GDP or recession, higher unemployment because the economy is now further away from potential GDP, and an inflationary higher price level as well. For example, the U.S. economy experienced recessions in 1974\u20131975, and 1980\u20131981 that were each preceded or accompanied by a rise in oil prices. In the 1970s, this pattern of a shift to the left in AS leading to a stagnant economy with high unemployment and inflation was nicknamed <strong>stagflation<\/strong><i>.<\/i><\/p>\n<p><iframe loading=\"lazy\" src=\"https:\/\/h5p.org\/h5p\/embed\/240765\" width=\"1090\" height=\"560\" frameborder=\"0\"><\/iframe><br \/>\n<strong>Figure 2 (Interactive Graph). Shifts in Aggregate Supply. <\/strong>Higher prices for key inputs shifts AS to the left.<\/p>\n<p>Conversely, a decline in the price of a key input like oil, represents a positive supply shock shifting the\u00a0SRAS curve to the right, providing an incentive for more to be produced at every given price level for outputs. From 1985 to 1986, for example, the average price of crude oil fell by almost half, from $24 a barrel to $12 a barrel. Similarly, from 1997 to 1998, the price of a barrel of crude oil dropped from $17 per barrel to $11 per barrel. In both cases, the plummeting price of oil led to a situation like that presented earlier in\u00a0Figure\u00a01, where the outward shift of\u00a0SRAS to the right allowed the economy to expand, unemployment to fall, and inflation to decline.<\/p>\n<div class=\"textbox tryit\">\n<h3>Try It<\/h3>\n<p>\t<iframe id=\"lumen_assessment_7522\" class=\"resizable\" src=\"https:\/\/assessments.lumenlearning.com\/assessments\/load?assessment_id=7522&#38;embed=1&#38;external_user_id=&#38;external_context_id=&#38;iframe_resize_id=lumen_assessment_7522\" frameborder=\"0\" style=\"border:none;width:100%;height:100%;min-height:400px;\"><br \/>\n\t<\/iframe><\/p>\n<\/div>\n<\/div>\n<div class=\"section\" title=\"Other Supply Shocks\">\n<div class=\"titlepage\">\n<div>\n<div>\n<h2 id=\"m48742-ch24mod03_03\"><span class=\"cnx-gentext-section cnx-gentext-t\">Other Supply Shocks<\/span><\/h2>\n<\/div>\n<\/div>\n<\/div>\n<p>Along with wages and energy prices, another source of supply shocks is\u00a0the cost of imported goods that are used as inputs for domestically-produced\u00a0products. In these cases as well, the lesson is that lower prices for inputs cause\u00a0SRAS to shift to the right, while higher prices cause it to shift back to the left.<\/p>\n<div class=\"textbox tryit\">\n<h3>Try It<\/h3>\n<p>\t<iframe id=\"lumen_assessment_7521\" class=\"resizable\" src=\"https:\/\/assessments.lumenlearning.com\/assessments\/load?assessment_id=7521&#38;embed=1&#38;external_user_id=&#38;external_context_id=&#38;iframe_resize_id=lumen_assessment_7521\" frameborder=\"0\" style=\"border:none;width:100%;height:100%;min-height:400px;\"><br \/>\n\t<\/iframe><\/p>\n<\/div>\n<p>Similarly, an unexpected early freeze could destroy a large number of agricultural crops, a shock that would shift the AS curve to the left since there would be fewer agricultural products available at any given price.<\/p>\n<h2><span style=\"color: #333333;\"><strong>When Does A Supply Shock Shift Potential GDP?<\/strong><\/span><\/h2>\n<p><span style=\"color: #333333;\">This important question really answers itself. Suppose there is a decrease in aggregate demand, which is shown by a leftward shift in AD, as shown in Figure 2.\u00a0In the short term, wages are sticky and output decreases along the SRAS, as we move from E<sub>1<\/sub> to E<sub>2<\/sub>. Over time, wages decrease and as they do, the SRAS shifts to the right due to the increase in firms&#8217; cost of production. The SRAS continues to shift until GDP has returned to potential. Graphically, we move from E<sub>2<\/sub> to E<sub>3<\/sub>.\u00a0 Because this event was caused by a demand shock (i.e. a shift in AD), it had no effect on potential GDP. The supply of labor didn&#8217;t change, nor did labor productivity so LRAS stays constant, though SRAS shifted. LRAS shifts only when the potential GDP increases or decreases.<\/span><\/p>\n<div id=\"attachment_11156\" style=\"width: 510px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-11156\" class=\"wp-image-11156\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/2043\/2015\/05\/15070518\/demand_shock1-300x249.png\" alt=\"Graph showing the change in aggregate demand. Price is on the y-axis and real GDP on the x-axis. As the downward sloping AD curve shifts in, the vertica LRAS curve remains the same. SRAS changes in the short term to a lower point in GDP, then shifts down on the LRAS curve, resulting in a lower price by the same real GDP.\" width=\"500\" height=\"415\" \/><\/p>\n<p id=\"caption-attachment-11156\" class=\"wp-caption-text\"><span style=\"color: #333333;\"><strong>Figure 3.<\/strong>\u00a0<strong>A Demand Shock.<\/strong> When AS shifts <em>in response<\/em><em> to<\/em>\u00a0a shift in AD, potential GDP (and LRAS) is unchanged. Rather, the model adjusts back to the original potential GDP, moving from E<sub>1<\/sub> to E<sub>3<\/sub>.<\/span><\/p>\n<\/div>\n<div class=\"textbox examples\">\n<h3>Watch It<\/h3>\n<p>Review things that shift aggregate supply in the following video.<\/p>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/UwAQRnpVMzI?rel=0&amp;start=11\" width=\"800\" height=\"470\" frameborder=\"0\"><\/iframe><\/p>\n<p>The video went over the following scenarios. Take a second look and quiz yourself on what will happen to aggregate supply in each situation.<\/p>\n<ol>\n<li>A significant increase in nominal wages.\n<div class=\"qa-wrapper\" style=\"display: block\"><span class=\"show-answer collapsed\" style=\"cursor: pointer\" data-target=\"q193890\">Show Answer<\/span><\/p>\n<div id=\"q193890\" class=\"hidden-answer\" style=\"display: none\">Costs up, AS down<\/div>\n<\/div>\n<\/li>\n<li>An increase in physical capital.\n<div class=\"qa-wrapper\" style=\"display: block\"><span class=\"show-answer collapsed\" style=\"cursor: pointer\" data-target=\"q468587\">Show Answer<\/span><\/p>\n<div id=\"q468587\" class=\"hidden-answer\" style=\"display: none\">Productivity up, AS up<\/div>\n<\/div>\n<\/li>\n<li>A decrease in corporate taxes on producers.\n<div class=\"qa-wrapper\" style=\"display: block\"><span class=\"show-answer collapsed\" style=\"cursor: pointer\" data-target=\"q860069\">Show Answer<\/span><\/p>\n<div id=\"q860069\" class=\"hidden-answer\" style=\"display: none\">Production up, AS up<\/div>\n<\/div>\n<\/li>\n<li>An increase in expected inflation.\n<div class=\"qa-wrapper\" style=\"display: block\"><span class=\"show-answer collapsed\" style=\"cursor: pointer\" data-target=\"q194358\">Show Answer<\/span><\/p>\n<div id=\"q194358\" class=\"hidden-answer\" style=\"display: none\">Costs up, AS down<\/div>\n<\/div>\n<\/li>\n<\/ol>\n<\/div>\n<div class=\"textbox tryit\">\n<h3>Try It<\/h3>\n<p>These questions allow you to get as much practice as you need, as you can click the link at the top of the first question (\u201cTry another version of these questions\u201d) to get a new set of questions. Practice until you feel comfortable doing the questions.<\/p>\n<p><iframe loading=\"lazy\" id=\"ohm152964\" class=\"resizable\" src=\"https:\/\/ohm.lumenlearning.com\/multiembedq.php?id=152964-152965-152904-152905&theme=oea&iframe_resize_id=ohm152964&show_question_numbers\" width=\"100%\" height=\"150\"><\/iframe><\/p>\n<\/div>\n<div class=\"textbox learning-objectives\">\n<h3>glossary<\/h3>\n<div class=\"titlepage\">\n<dl>\n<dt>negative supply shock:<\/dt>\n<dd> a leftward shift in the SRAS and LRAS curves <\/dd>\n<dt>positive supply shock:<\/dt>\n<dd> a rightward shift in the SRAS and LRAS curves<\/dd>\n<dt>stagflation: <\/dt>\n<dd>an economy experiences stagnant growth and high inflation at the same time<\/dd>\n<dt>supply shock: <\/dt>\n<dd>an event that shifts both short run and long run aggregate supply curves<\/dd>\n<\/dl>\n<\/div>\n<\/div>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-432\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Shared previously<\/div><ul class=\"citation-list\"><li>Shifts in Aggregate Supply. <strong>Authored by<\/strong>: OpenStax College. <strong>Provided by<\/strong>: Rice University. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/cnx.org\/contents\/vEmOH-_p@4.44:7tnNrXNY\/Shifts-in-Aggregate-Supply\">https:\/\/cnx.org\/contents\/vEmOH-_p@4.44:7tnNrXNY\/Shifts-in-Aggregate-Supply<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em>. <strong>License Terms<\/strong>: Download for free at http:\/\/cnx.org\/contents\/bc498e1f-efe9-43a0-8dea-d3569ad09a82@4.44<\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">All rights reserved content<\/div><ul class=\"citation-list\"><li>Aggregate Supply Practice. <strong>Provided by<\/strong>: ACDC Leadership. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/www.youtube.com\/watch?v=UwAQRnpVMzI\">https:\/\/www.youtube.com\/watch?v=UwAQRnpVMzI<\/a>. <strong>License<\/strong>: <em>Other<\/em>. <strong>License Terms<\/strong>: Standard YouTube License<\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":74,"menu_order":8,"template":"","meta":{"_candela_citation":"[{\"type\":\"cc\",\"description\":\"Shifts in Aggregate Supply\",\"author\":\"OpenStax College\",\"organization\":\"Rice University\",\"url\":\"https:\/\/cnx.org\/contents\/vEmOH-_p@4.44:7tnNrXNY\/Shifts-in-Aggregate-Supply\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"Download for free at http:\/\/cnx.org\/contents\/bc498e1f-efe9-43a0-8dea-d3569ad09a82@4.44\"},{\"type\":\"copyrighted_video\",\"description\":\"Aggregate Supply Practice\",\"author\":\"\",\"organization\":\"ACDC 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