With a negative aggregate supply shock, monetary policy credibility can ________.

Name: With a negative aggregate supply shock, monetary policy credibility can ________.
Brand: Quizplus
Rating: 4.8 (55 reviews)

Question

Quizplus · Accepted Answer

A negative aggregate supply shock typically leads to higher inflation and lower output. If the central bank has credibility, it means that people believe it will take appropriate actions to control inflation. This belief can help moderate inflation expectations, leading to a better outcome than if the central bank were not credible.

With a Negative Aggregate Supply Shock, Monetary Policy Credibility Can