Question: Suppose in the short run there is a negative shock to the goods market; assume prices are fixed in the short run in this question.

Suppose in the short run there is a negative shock to the goods market; assume prices are fixed in the short run in this question.

a. Give all the ways the goods market can suffer a negative shock in the short run.

b. If, due to monetary policy, the real interest rate remains constant in the short run, explain how this negative shock to the goods market affects national saving, private saving, government saving, and investment.

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