It is easier for the central bank of an economy to target inﬂation when faced with supply-side shocks rather than demand-side shocks.

Question

Quizplus · Accepted Answer

It is generally more difficult for a central bank to target inflation during supply-side shocks, as these shocks can lead to both higher prices and lower economic output. Demand-side shocks, on the other hand, typically lead to lower prices and higher output, making it easier for the central bank to stimulate demand and control inflation.

It Is Easier for the Central Bank of an Economy