Supply shocks after 1985
A)forced the Fed to follow restrictive monetary policy and caused a negative output ratio.
B)forced the Fed to follow restrictive monetary policy and caused a positive output ratio.
C)allowed the Fed to follow accommodative monetary policy and caused a negative output ratio.
D)allowed the Fed to follow accommodative monetary policy and push the output ratio toward zero.

Question

Quizplus · Accepted Answer

Supply shocks after 1985 allowed the Federal Reserve (Fed) to adopt an accommodative monetary policy stance, which aimed at mitigating the negative impacts of the shocks on the economy. This approach helped in pushing the output ratio toward a more neutral or zero level, balancing between inflation and unemployment without forcing the economy into a restrictive stance.

Supply Shocks After 1985