Which shock can the Fed deal with most effectively?
A) a major oil shock
B) a shock to the LRAS curve
C) a shock that shifts the SRAS curve
D) a shock to AD

Question

Quizplus · Accepted Answer

The Fed can most effectively deal with a shock to AD through its monetary policy tools, such as adjusting interest rates and implementing quantitative easing measures. While the Fed may have some tools to address a shock to the LRAS curve or a major oil shock, these types of shocks may have more long-term impacts on the economy and may require fiscal policy or structural changes. Additionally, a shock that shifts the SRAS curve may be more difficult for the Fed to address, as it may involve supply-side factors that are beyond the scope of monetary policy actions.

Which Shock Can the Fed Deal with Most Effectively