Which of the following statements is true about shocks in the macroeconomy? Shoc
ID: 1112177 • Letter: W
Question
Which of the following statements is true about shocks in the macroeconomy?
Shocks may occur to either demand or supply, but they are always negative.
Only supply shocks contribute to fluctuations in economic activity over time.
3. Shocks are generally anticipated, meaning that policy makers can usually prevent recessions.
Shocks are a primary cause of business cycle fluctuations.
1.Shocks may occur to either demand or supply, but they are always negative.
2.Only supply shocks contribute to fluctuations in economic activity over time.
3. Shocks are generally anticipated, meaning that policy makers can usually prevent recessions.
4.Shocks are a primary cause of business cycle fluctuations.
Explanation / Answer
Solution: Shocks are a primary cause of business cycle fluctuations
Explanaton: As per the Keynesian aggregate demand shocks are primary cause of business cycle fluctuations. These either shift IS curve or LM curve, thus affecting the aggregate demand for output.
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