A positive real shock is the one responsible for an increase in growth and a decrease in the inflation rate.
An inflation rate is described as an increase in process and a decrease in purchasing power. It is important to mention that if the prices of goods and services have increased, it results in reduced ability or purchasing ability. The increase in the prices is associated with the percentage increase in the inflation rate.
A positive real shock highlights a market condition in which the aggregate supply of services and goods has increased. This results in a reduction in the prices of the goods and purchasing power of people increases. Hence, the inflation rate decreases. Furthermore, the national income of a country also increases due to the increase in the positive real shock.
It can be concluded that a positive real shock is the one responsible for an increase in growth and a decrease in the inflation rate.
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