Question

8. External shocks to an economy include: A. Innovation, population growth, and spending behav B. Disruptions in trade, wars, and natural disasters. C. Tax policy, government spending, and the availabil D. Jobs, prices, and growth.

Answer 1

solution Q-8. Answer - B. All the other options are having shocks which are not external but related to economy Internally. Distruptions in trade, war and natural disasters are not related to economy directly, So, they are external shocka Q-9- Answer. Use of Monetary Policy, Classical system says that there is Invisible hands which keeps the economy in equilibrium. There need not be any Intervention by the govt. so, they follow Laissez-faire approach. They said with free market forces economy will make adjustment itsef. itself. so Use of Monetary policy is not Consistent with classical theory,