Refer to the fiGure

question 127

Multiple Choice

Refer to the figure. Assuming this market is representative of the economy as a whole, a negative demand shock will most likely

• A) cause inflation.
• B) increase unemployment.
• C) lower prices but leave output unaffected.
• D) reduce both prices and output.

---

Definitions:

Domestic Price

The price of goods or services within a country's borders, exclusive of any tariffs, export fees, or import costs.

Tariff

A tax imposed on imported goods and services, aimed at making these goods costlier and protecting domestic industries.

Fixing Exchange Rates

The act of establishing the value of one currency in terms of another through government or central bank intervention, rather than allowing it to be determined by market forces.

Black Markets

Underground economies where goods or services are traded illegally, bypassing official regulations or laws.