In the face of ________ shocks, monetary policy to stabilize inflation also stabilizes output.

Question

Quizplus · Accepted Answer

Demand shocks are the type of economic shocks where monetary policy aimed at stabilizing inflation can also help stabilize output. This is because demand shocks directly affect the level of demand in the economy, and by adjusting interest rates to manage inflation, central banks indirectly influence demand levels, thereby stabilizing output.

In the Face of ________ Shocks, Monetary Policy to Stabilize