There is a negative demand shock when
A) interest rates fall.
B) consumers become more optimistic.
C) government reduces net taxes.
D) interest rates rise.
E) government spending increases.

Question

Quizplus · Accepted Answer

A negative demand shock is typically caused by a decrease in consumer spending or investment, and a rise in interest rates can deter borrowing and spending, thereby decreasing demand. The other options listed are more likely to stimulate demand and have a positive impact on the economy.

There Is a Negative Demand Shock When