Answered

At Westonci.ca, we make it easy for you to get the answers you need from a community of knowledgeable individuals. Join our platform to connect with experts ready to provide accurate answers to your questions in various fields. Explore comprehensive solutions to your questions from knowledgeable professionals across various fields on our platform.

Suppose that prices are sticky in the short-run. Which of the following best describes the economy's response to a negative demand shock?

a. Firms' inventories will decrease, causing them to increase production Ultimately, real GOP will increase and unemployment wil decres.
b. Firms' Inventories will increase, causing them to cut production Vitimately, real GDP will decrease and unemployment will decrease.
c. Firms' inventories will increase, causing them to cut production Ultimately, real GDP will increase and unemployment will increase.
d. Firms' inventories will increase, causing them to cut production. Ultimately, real GOP will decrease and unemployment will increase.

Sagot :

Answer: Firms' inventories will increase, causing them to cut production. Ultimately, real GDP will decrease and unemployment will increase

Explanation:

A negative demand shock simply means when there is a reduction in demand.

If prices are sticky in the short-run, the economy's response to a negative demand shock will be that there'll be an increase in the firms' inventories, causing them to cut production. Ultimately, real GDP will decrease and unemployment will increase.

Thank you for visiting our platform. We hope you found the answers you were looking for. Come back anytime you need more information. We appreciate your time. Please come back anytime for the latest information and answers to your questions. We're glad you chose Westonci.ca. Revisit us for updated answers from our knowledgeable team.