In the face of a negative shock to consumer confidence,politicians are on the fence about whether to implement policies based on the advice of economists or to make decisions on the basis of Tarot card readings.What would happen during the period in which they are making up their minds about which strategy to pursue?
A)
$\vec { v }$ would rise
B)
$\vec { v }$ would fall
C)
$\vec { Y } _ { R }$ would rise
D)
$\vec{ P }$ would rise

Question

Quizplus · Accepted Answer

Once politicians are uncertain about the policy measures to undertake given a negative shock to consumer confidence, it is likely that they will delay taking action. This inaction leads to a decrease in velocity ($\vec{v}$). This decrease occurs since the slowed pace at which funds are exchanged between the various participants in the economy, notably firms and households. As a result, transactions in the economy become limited which, in turn, depresses economic activity, output and input (i.e., $\vec{Y}_R$) and inflation (i.e., $\vec{P}$).

In the Face of a Negative Shock to Consumer Confidence,politicians v⃗\vec { v }v

In the Face of a Negative Shock to Consumer Confidence,politicians $\vec { v }$