1. Assume you observe the following pattern in the data: RGDP (Real Gross Domestic Product) is...
1. Assume you observe the following pattern in the data: RGDP (Real Gross Domestic Product) is decreasing and the GDP Deflator is decreasing. What type of shock could generate this pattern in the data?
a. Negative Aggregate Supply Shock
b. Positive Aggregate Supply Shock
c. Negative Aggregate Demand Shock
d. Positive Aggregate Demand Shock
2. Assume you observe the following pattern in the data: the growth rate of RGDP is negative and the rate of inflation is increasing. What type of shock could generate this pattern in the data?
a. Negative Aggregate Demand Shock
b. Positive Aggregate Supply Shock
c. Positive Aggregate Demand Shock
d. Negative Aggregate Supply Shock
Homework Answers
1. c. Negative Aggregate Demand Shock
Decrease in aggregate demand leads to decrease in price and real gdp.
2. d. Negative Aggregate Supply Shock
Decrease in aggregate supply leads to decrease in real gdp and increase in price.
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