Negative demand shocks have a tendency to ________ real GDP relative to potential GDP and ________ the inflation rate.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

Question

Quizplus · Accepted Answer

Negative demand shocks typically reduce real GDP below potential GDP and decrease the inflation rate due to lower overall demand in the economy.

Negative Demand Shocks Have a Tendency to ________ Real GDP