A policy response to a beneficial supply shock which focuses the full impact of the shock to lower the inflation rate is
A)a neutral policy.
B)an extinguishing policy.
C)an accommodating policy.
D)an aggravating policy.

Question

Quizplus · Accepted Answer

An accommodating policy focuses on fully realizing the benefits of a beneficial supply shock while minimizing its impact on inflation. This can be achieved by reducing interest rates and increasing government spending to stimulate demand and offset any potential reduction in prices. By doing so, the full impact of the supply shock is realized in terms of higher output and lower unemployment, while inflation remains within an acceptable range.

A Policy Response to a Beneficial Supply Shock Which Focuses