If Prices Are Inflexible, Then a Negative Demand Shock Will

question 111

Multiple Choice

If prices are inflexible, then a negative demand shock will lead to

• A) a short-run increase in real GDP.
• B) a short-run decrease in real GDP.
• C) a short-run decrease in prices.
• D) no change in real GDP in the short run.

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Definitions:

Wager

An agreement between two parties where the outcome of a specified event leads to the transfer of something of value from the loser to the winner.

Binding Contract

A legal agreement between parties that is enforceable by law, requiring all signatories to fulfill their respective obligations.

Party Seeking Coverage

Refers to an individual or entity that is applying for or requesting insurance protection from an insurer.

Insurance Company

A financial institution that provides a range of insurance policies to protect individuals and businesses against risk.