FIGURE 15-6: A Supply Shock A supply shock in period t shifts the dynamic aggregate supply curve upward from DAS_t₋₁ to DAS_t. The dynamic aggregate demand curve is unchanged. The economy’s short-run equilibrium moves from point A to point B. Inflation rises and output falls. In the subsequent period (t + 1), the dynamic aggregate supply curve shifts to DAS_t₊₁ and the economy moves to point C. The supply shock has returned to its normal value of zero, but inflation expectations remain high. As a result, the economy returns only gradually to its initial equilibrium, point A.