Which is a negative demand shock?
A) lower interest rates.
B) lower value of Canadian dollar.
C) higher income taxes.
D) rising price level.
E) rising input prices.

Question

Quizplus · Accepted Answer

Higher income taxes reduce disposable income and therefore decrease consumer spending, resulting in a negative demand shock. Lower interest rates can stimulate demand and investment, while a lower value of Canadian dollar can increase exports and increase demand. Rising price level and rising input prices can lead to inflation, but they do not necessarily cause a significant negative shock to demand.

Which Is a Negative Demand Shock