Classify each of the following as a supply or demand shock. Use a graph to show the
Question:
Classify each of the following as a supply or demand shock. Use a graph to show the effects on inflation and output in the short run and the long run.
a. Financial frictions increase.
b. Households and firms become more optimistic about the economy.
c. Favourable weather produces a record crop of wheat and corn in the Prairie provinces.
d. Steel workers go on strike for four weeks.
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a Negative demand shock An increase in financial frictions reduces aggregate demand Output and i...View the full answer
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Related Book For 
The Economics of Money Banking and Financial Markets
ISBN: 978-0321785701
5th Canadian edition
Authors: Frederic S. Mishkin, Apostolos Serletis
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