Unit 5 - April 2

Supply Shock - rapid and significant increase in resource prices, which cause the SRAS to shift which results in producing a shift in the SRPC curve.

• Examples
• Oil embargo.
• Increase in input prices.
• Wages heights
• Could be positive or negative, depending on what it is.
• Could lead to stagflation - simultaneous increase in inflation and unemployment.

Disinflation - reduction in inflation rate from year to year, which can be seen in the LRPC.