What impact will a negative demand shock have on the main measures of economic performance?
A) Real GDP will increase and unemployment will decrease.
B) Real GDP will decrease and unemployment will increase.
C) Real GDP will decrease and unemployment will decrease.
D) Real GDP will increase and unemployment will increase.

Question

Quizplus · Accepted Answer

A negative demand shock will cause a decrease in overall economic activity and a decrease in demand for goods and services. This will result in a decrease in Real GDP, as there will be a decline in output and income. Additionally, businesses will likely need to decrease production and cut costs, leading to an increase in unemployment. Therefore, real GDP will decrease and unemployment will increase.

What Impact Will a Negative Demand Shock Have on the Main