Which of the following could be a negative TFP shock?
A) a hurricane
B) lower taxes
C) a better court system
D) lower tariff rates
E) a low debt-to-GDP ratio

Question

Quizplus · Accepted Answer

A negative TFP shock refers to any event or policy change that reduces the productivity or efficiency of an economy's resources. A hurricane could damage infrastructure, destroy crops, and displace workers which would all negatively impact productivity and therefore could be considered a negative TFP shock. Lower taxes, a better court system, lower tariff rates, and a low debt-to-GDP ratio are all examples of policies or conditions that could improve productivity and would therefore not be considered negative TFP shocks.

Which of the Following Could Be a Negative TFP Shock