Monetary policy cannot stabilize both output and inflation in response to supply shocks.

Name: Monetary policy cannot stabilize both output and inflation in response to supply shocks.
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Question

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Monetary policy often faces a trade-off between stabilizing inflation and stabilizing output when responding to supply shocks, as actions to counteract inflation might exacerbate output fluctuations and vice versa.

Monetary Policy Cannot Stabilize Both Output and Inflation in Response