A Medium-Sized Negative Shock

question 127

Multiple Choice

A medium-sized negative shock:

• A) always produces a medium-sized economic downturn.
• B) will not have a great impact on GDP.
• C) can cause a large economic downturn.
• D) will always cause a large economic downturn.

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Definitions:

Short Run

A period of time in which at least one input in the production process is fixed, influencing decisions made by firms about production levels.

Plant Capacity

Plant capacity refers to the maximum output a manufacturing or production facility can achieve under normal conditions within a given time period.

Fixed Input

A resource or factor of production whose quantity remains constant regardless of the level of output or activity.

Short Run

A period in economics where at least one input is fixed and cannot be changed, limiting the ability to increase production.