Each of the follow scenarios depicts a situation that will result in some sort o

Question

Each of the follow scenarios depicts a situation that will result in some sort of demand shock. After reading each scenario, please determine whether the associated demand shock will be positive or negative. After several weeks of economic instability, the Swedish stock market begins to quickly decline as consumers lose confidence in the economy. After several years of rapid growth, the housing market begins to lose value and consumers scale back their spending in response. The United States government passes a tax cut of 4% for all citizens, resulting in a general rise in the level of wealth. The British government institutes a new public housing program which aims to build 3 million new apartment units across the United Kingdom. The introduction of the program dramatically increases the government?s demand for raw materials and building supplies. Following a period of sustained economic decline, major companies in both the automobile and textile industries in the United States begin to lay off workers and close factories, citing loss of confidence in the ability of the American government to properly manage the economy. Positive Demand Shock Negative Demand Shock

Explanation / Answer

Negative demand shock

Negative demand shock

Positive demand shock

Positive demand shock

Negative demand shock

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