To restore growth and reduce unemployment in response to a negative real shock,the Federal Reserve would:
A) decrease the money growth rate,which will lower both the inflation rate and economic growth rate.
B) decrease the money growth rate,which will increase both the inflation rate and economic growth rate.
C) increase the money growth rate,which will lower both the inflation rate and economic growth rate.
D) increase the money growth rate,which will increase both the inflation rate and economic growth rate.

Question

Quizplus · Accepted Answer

To restore growth and reduce unemployment in response to a negative real shock, the Federal Reserve would need to increase the money growth rate. This would lead to an increase in both the inflation rate and economic growth rate. By increasing the money growth rate, the Fed can stimulate demand and help boost economic activity, which would in turn lead to a reduction in unemployment. While increasing the money growth rate could lead to higher inflation in the short-term, the Fed can adjust its policy in the long-term to keep inflation under control. Therefore, option D is the best choice.

To Restore Growth and Reduce Unemployment in Response to a Negative