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

Question

Quizplus · Accepted Answer

To reduce inflation in response to a negative real shock, the Federal Reserve would need to decrease the money growth rate. This would lower both the inflation rate and economic growth rate as a result of reduced spending and investment. This would help to stabilize the economy and restore equilibrium. Therefore, option A is the correct choice. The other options suggest increasing the money growth rate which would worsen inflation and economic growth rates.

To Reduce Inflation in Response to a Negative Real Shock,the