An effective way to combat real shocks is to change the growth in government spending.

Question

Quizplus · Accepted Answer

Real shocks, which affect the supply side of the economy (such as changes in technology or resource availability), are not effectively addressed by changing government spending, which primarily influences the demand side. Monetary and fiscal policies are less effective against real shocks compared to supply-side policies like improving technology or labor market flexibility.

An Effective Way to Combat Real Shocks Is to Change