By using monetary policy,the Fed can partially offset the effects of a supply shock.

Question

Quizplus · Accepted Answer

Monetary policy can be used to control the supply of money and credit in the economy. By adjusting interest rates, the Fed can influence consumer and business spending and borrowing, which can help to mitigate the negative effects of a supply shock such as a sudden increase in the price of oil or a natural disaster that disrupts production. However, there are limits to the effectiveness of monetary policy in addressing supply shocks and other economic challenges.

By Using Monetary Policy,the Fed Can Partially Offset the Effects