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Suppose consumer confidence increases throughout the entire economy. The effect of this change on the economy is an example o
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Answer #1

It has been stated that consumer confidence increases throughout the entire economy.

When consumer confidence increases then this implies that consumers are expecting an increase in income in future time period.

When consumers expect an increase in income in future time period then they tends to increase their consumption in current time period.

As consumption in the economy increases, aggregate demand tends to increase in the economy.

This is termed as positive demand shock.

So,

The given statement is an example of a demand shock.

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