A Negative Shock to AD Will Cause the Growth Rate

question 76

Multiple Choice

A negative shock to AD will cause the growth rate of real GDP to increase in:

• A) the short run only.
• B) the long run only.
• C) both the short run and the long run.
• D) neither the short run nor the long run.

---

Definitions:

Incremental Net Cash Flows

The difference in a company's cash flows when considering a proposed change, such as an investment or project.

Overhead Costs

Expenses not directly tied to product production, such as rent, utilities, and administrative salaries, essential for running a business.

Distribution Efficiencies

The optimization of processes and resources involved in distributing products or services from the producer to the consumer.

Cost of Equity

The cost of equity represents the compensation the market demands in exchange for owning the asset and bearing the risk of ownership.