A negative demand shock would lead to a decline in both the price level and output in the short run.

Name: A negative demand shock would lead to a decline in both the price level and output in the short run.
Brand: Quizplus
Rating: 4.9 (39 reviews)

Question

Quizplus · Accepted Answer

A negative demand shock means that consumers are willing to buy less at a given price level, which leads to a decrease in both the price level and output. The decrease in output is due to firms producing fewer goods to match the reduced demand. This is a typical feature of a recession.

A Negative Demand Shock Would Lead to a Decline in Both