The widespread,but not universal,consensus among economists would be to respond to
A)an adverse supply shock with an accommodating policy.
B)an adverse supply shock with an extinguishing policy.
C)an adverse demand shock with a policy to offset the shock.
D)all of the above.

Question

Quizplus · Accepted Answer

The widespread consensus among economists is to respond to an adverse demand shock with a policy to offset the shock. This could be achieved through measures such as fiscal stimulus or monetary policy that boost demand and stimulate economic activity. However, in the case of an adverse supply shock, there is not a universal consensus. Some economists may argue for an accommodating policy, such as lowering interest rates to encourage investment and stimulate supply. Others may argue for an extinguishing policy, such as reducing government spending or raising taxes to reduce demand and dampen inflationary pressures. Thus, the best choice is C, which reflects the consensus approach to responding to an adverse demand shock.

The Widespread,but Not Universal,consensus Among Economists Would Be to Respond