Ask Question
22 January, 10:04

If the economy is experiencing a recession due to a negative aggregate demand shock, the return to potential output

will be slower, the faster wages and prices adjust

will be quicker, the slower wages and prices adjust

will be quicker, the faster wages and prices adjust

will be quick regardless of the speed of wage and price adjustment

0
Answers (1)
  1. 22 January, 10:22
    0
    If the economy is experiencing a recession due to a negative aggregate demand shock, the return to potential output will be slower, the faster wages and prices adjust.

    Explanation:

    The economic shock of demand is an unexpected phenomenon that suddenly raises or reduces demand for goods or services. A shock of positive demand increases total demand and a shock of negative demand decreases aggregate demand. In both situations, products and services costs are impacted.

    Stock shocks are somewhat different from shocks of demand. In this scenario, whether such shocks are temporary or permanent depends on the long term effect.

    For example, assume that a rise in oil prices results in a negative supply shock (as a raise in input prices would result in a drop in SRAS). Having a negative supply shock, demand is declining, but inflation and unemployment are rising.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “If the economy is experiencing a recession due to a negative aggregate demand shock, the return to potential output will be slower, the ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers