IGNOU BECM 162 2025 2026 - Explain the impact of supply shocks on output and price levels.

Question

Explain the impact of supply shocks on output and price levels.

02 Mar 2026

Answer :

Word Count : 274

Supply shocks are unexpected events that suddenly alter the availability of goods and services in an economy, affecting both output and price levels. A positive supply shock, such as a technological improvement or a sudden increase in resource availability, reduces production costs and shifts the aggregate supply curve to the right. This leads to higher output and lower price levels, promoting economic growth and reducing inflationary pressures. Firms can produce more at lower costs, and consumers benefit from lower

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