/Subtype /Image New technology makes production easier which increases output. /Filter /FlateDecode /Type /XObject Any change in the demand for goods and services C. Any change in the supply of goods and services D. A decrease in real GDP >>
Which of the following best represents a positive demand shock when prices are flexible? In some cases, however, the term is applied to significant but unexpected events that occur within the system.
Because markets and industries are interconnected in the economy, large shocks to either supply or demand in any sector of the economy can have far-reaching macroeconomic impact. This combination of economic stagnation and inflation is commonly referred to as stagflation.
14. The introduction of new technology can also lead to an economic shock as new technology can, in some cases, drastically increase the supply of a given product.
In practice, global variables are rarely If an economy wants to increase its current level of investment, it must: 11. These shocks are mostly unpredictable and came without any signal and affect almost all the macroeconomic aggregates of the economy. Economic shocks have widespread and lasting effects on the economy, and are the root cause of recessions and economic cycles in Real Business Cycle Theory. The business cycle depicts: D. short-run fluctuations in output Mock test ECN - 1 Real gross domestic product C will increase if there is an increase in the level of output 2 Suppose that real GDP increases by 5, 26 out of 27 people found this document helpful, C. will increase if there is an increase in the level of output, 2.
Suppose that real GDP increases by 5% while the population of a country increases by 7%.
The same is true with natural disasters, like Hurricane Katrina and Hurricane Andrew and foreign attacks like 9/11. Everything You Need to Know About Macroeconomics. Supply and demand shocks are both temporary in nature; eventually, the economy does return to some form of equilibrium.
When demand increases significantly, prices increase and availability tends to decrease; when demand decreases, price decreases and availability remains high.
When there is a technological advancement, a company puts in the same input but attains greater output than before.
Course Hero is not sponsored or endorsed by any college or university. What Are the Characteristics of a Command Economy.
/Width 518
endobj
Supply shocks to consumer commodities with price inelastic demand, such as food and energy, can also lead to a demand shock by reducing consumers real incomes. If consumers become pessimistic, the economy is likely to experience a: Negative demand shock.
Higher oil prices are most likely to lead to. /Length 93436 Shocks tend to come either in the form of supply shocks or demand shocks; supply shocks are much more common. This preview shows page 1 - 2 out of 2 pages. In economics the word shocks refers to A situations where firms expectations, In economics, the word “shocks” refers to, situations where firms’ expectations are unmet, any changes in the demand for goods and services, any changes in the supply of goods and services, Higher oil prices are most likely to lead to, Chapter 23 - An Introduction to Macroeconomics. Economists often use the term technology in a much broader sense than it is understood by most people, so that many of the above examples of economic shocks, such as a rise in energy prices, would also fall under the category of technology shocks. 8. Real GDP and nominal GDP differ because the real GDP: C. has been adjusted for changes in the price level. Shocks are often unpredictable and are usually the result of events thought to be beyond the scope of normal economic transactions.