Asked Jun 11, 2019

If a natural disaster occurs in the US, this is an example of a

A) stone cold shock

B) negative aggregate demand shock

C) negative real shock

D) positive real shock

E) None of the answers are correct.


Expert Answer

Step 1

A natural disaster is very likely to destroy resources like capital and human resources.

Step 2

Real shocks are the shocks to the economy that affect real variables like real output, employment, etc. Examples of real shocks are productivity shocks, technology advancement, capital formation, etc.

Step 3

A natural disaster would destroy country’s human and capital resources. It would mean a negative real shock for the economy since it would directly r...

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