When hit with a real negative economic shock, the Fed must make its policy choice between
A) too low of a growth rate and too high of an unemployment rate.
B) too low of a growth rate and too high of an inflation rate.
C) too high of a growth rate and too low wages.
D) too high of a growth rate and too low of a savings rate.

Question

Quizplus · Accepted Answer

When hit with a real negative economic shock, the Fed must choose between low growth rate and high inflation rate to minimize the negative impact on the economy. A low growth rate can result in high unemployment rates, while a high inflation rate can lead to a decrease in the purchasing power of consumers and an increase in the cost of living, further depressing the economy. Therefore, the Fed must aim for a balance between growth and inflation that avoids both scenarios.

When Hit with a Real Negative Economic Shock, the Fed