Economists believe that most short-run ﬂuctuations
A) are the result of demand shocks.
B) are the result of supply shocks.
C) will not last long because prices will adjust to equalize the quantities demanded and supplied of goods and services.
D) will always have a negative effect on real GDP, inﬂation, and unemployment.

Question

Quizplus · Accepted Answer

Economists believe that short-run fluctuations are mostly caused by demand shocks, such as changes in consumer or government spending, investment, or exports. Supply shocks, such as natural disasters or disruptions in production, can also cause short-run fluctuations, but they tend to have a smaller and more temporary impact on the economy. Prices can adjust in the short-run, but they may not be able to fully offset the effects of demand shocks, especially if they are abrupt and unpredictable.

Economists Believe That Most Short-Run ﬂUctuations