In counteracting demand shocks, the Federal Reserve can achieve
A) price stability but not full employment.
B) both full employment and price stability.
C) full employment but not price stability.
D) neither full employment nor price stability.

Question

Quizplus · Accepted Answer

The Federal Reserve has the ability to use monetary policy to counteract demand shocks, which can help stabilize both employment levels and prices in the economy. By adjusting interest rates and open market operations, the Fed can influence the demand for goods and services, which can in turn impact employment levels and inflation rates. Therefore, the best choice is B - both full employment and price stability.

In Counteracting Demand Shocks, the Federal Reserve Can Achieve