The effect of an adverse demand shock is to
A)increase the level of aggregate demand.
B)cause prices to fall.
C)increase the firm's cost of producing at every level of output.
D)increase the level of employment.

Question

Quizplus · Accepted Answer

An adverse demand shock leads to a decrease in demand for goods and services, which typically causes prices to fall as suppliers attempt to attract the reduced number of buyers. This is a direct consequence of the law of supply and demand.

The Effect of an Adverse Demand Shock Is to