A monetary shock of a given size has a larger real effect:
A)the more it is anticipated by the public.
B)the more stable the underlying monetary environment.
C)the more fully it is explained and communicated to the public.
D)all of the above.

Question

Quizplus · Accepted Answer

A monetary shock has a larger real effect in a more stable underlying monetary environment because in such environments, any deviation from the norm is less expected and can cause more significant adjustments in economic behavior. In contrast, when shocks are anticipated or well-communicated, agents can adjust their expectations and actions accordingly, mitigating the real effects of the shock.

A Monetary Shock of a Given Size Has a Larger