Question

In the past six months, has short-run aggregate supply in the U.S shifted right or left? And what might have caused this shift? Provide any evidence you would like to support your claim.

Answer 1

In the past six months, the short run supply curve has shifted to the left. It is due to Covid-19 pandemic that has hurt US and many other countries. The pandemic creates a negative supply shock. This is because many workers cna not turn up for work as they are sick or due to the government imposed orders to stay indoors. As there are restrictions of movement on goods and services across countries, US producers who import essential inputs from abroad can not do so. Thus, both the lack of labor and broken supply chain will reduce supply and thus the supply curve in the short-run will shift to the left.