Monetary policymakers can take advantage of the impact that positive inflation shocks have on output by shifting the:

Question

Quizplus · Accepted Answer

A positive inflation shock shifts the short-run aggregate supply curve to the left, which reduces output. To offset this negative effect, monetary policymakers can shift the monetary policy reaction curve to the left, which will increase inflation and shift the short-run aggregate supply curve back to the right, restoring output to its original level.

Monetary Policymakers Can Take Advantage of the Impact That Positive