An example of a negative demand shock is
A) a decrease in the money supply.
B) a decrease in government spending.
C) an increase in foreign export demand.
D) a decrease in the price of imported oil.
E) a decrease in the money supply and a decrease in government spending.

Question

Quizplus · Accepted Answer

A negative demand shock refers to an event that suddenly decreases the demand for goods and services in an economy. Both a decrease in the money supply (A) and a decrease in government spending (B) can lead to a reduction in overall demand in the economy. A decrease in the money supply can reduce consumers' and businesses' ability to spend, while a decrease in government spending directly reduces demand for goods and services. Therefore, option E, which includes both, correctly identifies examples of negative demand shocks.

An Example of a Negative Demand Shock Is