Consider a negative (adverse) supply shock and negative (adverse) demand shock. As a result:
A) output may increase or decrease or remain the same.
B) price will decrease.
C) price will increase.
D) price may increase or decrease or remain the same.

Question

Quizplus · Accepted Answer

A negative supply shock typically increases prices due to lower availability of goods, while a negative demand shock usually decreases prices due to lower demand. When both shocks occur simultaneously, the effect on prices can vary, leading to an increase, decrease, or no change, depending on the relative magnitudes of the shocks.

Consider a Negative (Adverse) Supply Shock and Negative (Adverse) Demand