When using the Fed model to diagnose the economy, if a shock causes the real interest rate to rise, then the economy has been hit by financial shock.
The "Fed model" can be regarded as the Stock Valuation Model" which can be described as the theory of equity valuation that compares the stock market's forward earnings yield as welll as the nominal yield on long-term government bonds
It should be noted that the financial shock thyat can hit thye econonmy can be described as the one that originates from the financial sector of the economy and the term is been used in the economy that deeply dependent on the flow of liquidity as well as the credit to fund normal operations and payrolls.
In conclusion, the financial shocks can be felt in most of the industry in an economy.
Therefore option A is correct.
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