Use the following to answer questions:
-A positive demand shock will result from:
A) a sudden increase in nominal wages.
B) an increase in the potential GDP.
C) a move by the Bank of Canada to lower the interest rate.
D) consumers and firms becoming more pessimistic.

Question

Use the following to answer questions: 
-A positive demand shock will result from:
A) a sudden increase in nominal wages. 
B) an increase in the potential GDP. 
C) a move by the Bank of Canada to lower the interest rate. 
D) consumers and firms becoming more pessimistic.

Quizplus · Accepted Answer

A positive demand shock occurs when there is an increase in aggregate demand, such as when the central bank lowers interest rates, making borrowing cheaper and encouraging spending and investment.

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