Monetary policy works best to counteract:
A) negative aggregate demand shocks.
B) negative supply shocks.
C) positive supply shocks.
D) LRAS shocks.

Question

Quizplus · Accepted Answer

Monetary policy is most effective in correcting negative aggregate demand shocks, as it can increase aggregate demand by reducing interest rates and encouraging borrowing and spending. However, it may be less effective in responding to negative supply shocks or LRAS shocks, as these are caused by factors such as supply disruptions or changes in productivity that cannot be easily addressed through monetary policy.

Monetary Policy Works Best to Counteract