Which term describes unforeseen and unexpected changes in the external business environment that tend to affect all businesses in the economy?

• A. External shocks
• B. Fiscal policy
• C. Gross Domestic Product
• D. Indirect tax

Answer: (A)

External shocks are unforeseen and unexpected changes in the external business environment that affect all businesses in the economy. They come from outside the firm and can alter demand, costs, or overall economic conditions, making them hard to predict and affecting many firms at once. Examples include natural disasters, sudden spikes in commodity prices, pandemics, and geopolitical events. This makes them different from fiscal policy, which are deliberate government actions; GDP, which is a measure of economic output; and indirect taxes, which are taxes on goods and services. So the term that best describes these broad, unexpected external changes is external shocks.