Which of the following is the Fed's best strategy for dealing with demand shocks?
A) Maintain a money supply target
B) Decrease the money supply
C) Maintain a passive monetary policy
D) Neutralize the impact with an increase in the money supply
E) Increase the interest rate.

Question

Quizplus · Accepted Answer

Neutralizing the impact of demand shocks with an increase in the money supply helps to stabilize the economy and avoid a recession. This is because demand shocks can cause a decrease in aggregate demand, leading to lower output and higher unemployment. By increasing the money supply, the Fed can stimulate spending and boost aggregate demand, helping to stabilize the economy.

Which of the Following Is the Fed's Best Strategy for Dealing