The "Yes - Markets Self-Adjust" camp argues that a positive demand shock results in
A) falling wages, reducing the excess supply of labour.
B) rising prices, reducing excess demand for products and services.
C) rising wages, reducing excess supply of labour.
D) decreased saving and falling interest rates.
E) falling Canadian average prices, increasing net exports.

Question

Quizplus · Accepted Answer

The "Yes - Markets Self-Adjust" camp argues that in response to a positive demand shock, prices will rise, reducing excess demand for products and services. This is because as demand increases, producers can charge higher prices for their goods and services. This higher price incentivizes producers to produce more, which ultimately leads to a reduction in excess demand. Therefore, choice B is the best answer.

The "Yes - Markets Self-Adjust" Camp Argues That a Positive