The "Yes - Markets Self-Adjust" camp argues that a positive supply shock results in
A) falling Canadian average prices, increasing Canadian spending on imports.
B) falling wages, increasing the quantity of labour supplied.
C) falling wages, decreasing the quantity of labour demanded.
D) rising Canadian average prices, decreasing net exports.
E) falling Canadian average prices, increasing R.O.W. spending on Canadian exports.

Question

Quizplus · Accepted Answer

The "Yes - Markets Self-Adjust" camp argues that a positive supply shock, such as an increase in productivity or a decrease in the cost of production, will increase the supply of goods and services, leading to lower prices. This will result in increased demand from both domestic and foreign consumers, including an increase in spending on Canadian exports by the Rest of the World (ROW). Therefore, the correct answer is E.

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