Which of the following is a negative real shock that occurred during the Great Depression?
A) The Smoot-Hawley tariffs led to a decrease in net exports.
B) Bank failures led to a decrease in the money supply.
C) Widespread bank failures led to a reduction in the productivity of financial intermediation.
D) A stock market crash decreased consumer wealth.

Question

Quizplus · Accepted Answer

A negative real shock refers to a sudden decrease in the economy's ability to produce goods and services. Widespread bank failures reduced the productivity of financial intermediation, which is a real shock as it affected the efficiency of the financial system in allocating resources.

Which of the Following Is a Negative Real Shock That