ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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All of the three
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Significant change to the exchange rate
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Significant boom or slump in housing or shares
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Consumer boom in one of our major trading partners
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Detailed explanation-1: -An earthquake, a terrorist event, a technological advance, and a government stimulus program can all cause a demand shock.
Detailed explanation-2: -Demand shock is a surprise event that can lead to a temporary increase or decrease in demand for goods or services. An example of a negative demand shock would be a global pandemic. An example of a positive demand shock would be government stimulus checks and relaxed monetary policy in response to the pandemic.
Detailed explanation-3: -A demand shock is a sudden and temporary increase or decrease in the demand for a good or a bundle of goods. Usually, the phrase “demand shock” is used in the context of aggregate demand, which describes the cumulative demand for an entire economy.
Detailed explanation-4: -A stock market crash, a liquidity crisis in the banking system, unpredictable changes in monetary policy, or the rapid devaluation of a currency would be examples of financial shocks.
Detailed explanation-5: -Shocks to aggregate demand is anything that reduces money demand: the velocity of money. Policies that the Federal government can implement to move the aggregate demand back to its natural level is increasing/decreasing the velocity of money or “skillfully controlling the money supply” (Mankiw 287).