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Consequences of Unstabilized Economic Shocks
If economic shocks are not countered by stabilization policies, an economy can suffer severe and lasting negative outcomes. Historical examples of such consequences include persistent high unemployment, as seen during the Great Depression, as well as damaging wage-price spirals and periods of stagflation.
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Economics
Economy
Introduction to Macroeconomics Course
Ch.5 Macroeconomic policy: Inflation and unemployment - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
CORE Econ
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The Challenge of Smoothing Consumption Against Unexpected Shocks
Idiosyncratic Shock
Systemic Shock
Income Path in a Model of Anticipated Income Decrease
The Objective of Macroeconomic Stabilization Policy
Consequences of Unstabilized Economic Shocks
Economic Equilibrium and its Self-Correcting Nature
Analyzing an Economic Event
A country unexpectedly discovers vast offshore oil reserves, leading to a significant, unanticipated increase in national wealth and a boom in related industries. Which of the following statements best analyzes why this event is classified as an economic shock?
A government's pre-announced plan to increase the national sales tax by 2%, scheduled to take effect in one year, is an example of a negative economic shock.
Match each economic event to its correct classification based on whether it represents an economic shock.
Defining an Economic Shock
Which of the following economic events would not be classified as an economic shock?
Analyzing Economic Events
A national government announces a new infrastructure spending plan that will be phased in over the next five years. In the same year, a sudden and severe drought devastates the country's agricultural sector, causing widespread crop failures and a sharp rise in food prices. Which statement best analyzes these events?
Analyzing Economic Disruptions in a Dependent Economy
For an economic event to be classified as a 'shock', its most essential characteristic is that it must be __________, meaning it was not anticipated by economic agents.
Anticipation of Shocks and the Basis for Insurance
Income Path in a Model of Anticipated Income Increase
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Mechanism of a Wage-Price Spiral
An economy experiences a sudden, sharp increase in the price of all imported raw materials, a critical input for most domestic industries. If policymakers do not intervene to stabilize the economy, which of the following combinations of economic outcomes is the most probable result?
Analyzing the Aftermath of a Financial Crisis
Match each potential economic outcome of an unstabilized shock with its correct description.
In an economy with no government or central bank intervention, a sudden, large-scale collapse in business investment is likely to result in a wage-price spiral.
Explaining Persistent Unemployment
An economy experiences a sudden, large increase in consumer spending that policymakers do not address. Arrange the following events to illustrate the logical progression of a resulting wage-price spiral.
Evaluating the Impact of an Unaddressed Agricultural Crisis
Evaluating the Severity of Economic Crises
When an economy experiences a sudden decrease in its ability to produce goods and services, and policymakers do not intervene, the resulting combination of rising prices and declining economic output is known as ________.