What is a supply shock? What is a demand shock? Describe an example of a supply shock and of a demand shock
What will be an ideal response?
A supply shock is an event that fundamentally reduces society's ability to produce goods and services. Examples will vary, but one example is a natural disaster such as a blizzard, tornado, or hurricane.
A demand shock is an event that reduces the willingness or ability of buyers to purchase goods and services. Examples will vary, but one example is a decrease in consumer confidence due to economic uncertainty about unemployment or inflation rates.
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Adverse selection can occur when
A) all persons involved in a transaction have full information. B) one person has information not available to others. C) post-agreement incentives result in workers shirking. D) nobody has any information about a particular product.
Trade restrictions have been defended on the grounds that they
a. raise prices domestically and thus benefit consumers b. increase imports c. lower prices domestically and thus benefit consumers d. decrease product quality in domestic markets e. protect domestic infant industries