Inﬂation targeting in the face of adverse supply shocks is likely to cause:
A) an increase in investment spending.
B) volatility in GDP.
C) the aggregate demand curve to move to the right.
D) instability in the price level.

Question

Quizplus · Accepted Answer

Inflation targeting in the face of adverse supply shocks can lead to volatility in GDP as central banks may adjust interest rates to control inflation, impacting economic output.

Inﬂation Targeting in the Face of Adverse Supply Shocks Is