Shocks to aggregate demand ______ require the Fed to choose between inflation and output stability; shocks to aggregate supply ______ require the Fed to choose between inflation and output stability.
A)do; do
B)do; do not
C)may or may not; may or may not
D)do not; do

Question

Quizplus · Accepted Answer

Shocks to aggregate demand do not require the Fed to choose between inflation and output stability because they can adjust monetary policy to stabilize both. However, shocks to aggregate supply do require a choice because stabilizing inflation may worsen output and vice versa.

Shocks to Aggregate Demand ______ Require the Fed to Choose