A medium-sized negative shock:
A) always produces a medium-sized economic downturn.
B) will not have a great impact on GDP.
C) can cause a large economic downturn.
D) will always cause a large economic downturn.

Question

Quizplus · Accepted Answer

A medium-sized negative shock can cause a large economic downturn, as it can disrupt various sectors of the economy and lead to a reduction in aggregate demand. The magnitude of the impact on GDP would depend on the duration and severity of the shock, as well as the effectiveness of policy responses to mitigate its effects.

A Medium-Sized Negative Shock