Monetary policy is LEAST effective in reversing
A) demand-pull inflation.
B) a decrease in private spending.
C) an adverse supply shock.
D) rapid growth in consumption expenditures.

Question

Quizplus · Accepted Answer

Monetary policy is least effective in countering an adverse supply shock, as it is caused by factors such as natural disasters or geopolitical events beyond the control of monetary authorities. Monetary policy can only address demand-side factors and cannot directly influence supply-side factors.

Monetary Policy Is LEAST Effective in Reversing