An adverse supply shock causes output to
A)rise.To counter this a central bank would increase the money supply.
B)rise.To counter this a central bank would decrease the money supply.
C)fall.To counter this a central bank would increase the money supply.
D)fall.To counter this a central bank would decrease the money supply.

Question

Quizplus · Accepted Answer

An adverse supply shock typically reduces output by increasing production costs, leading to higher prices and lower output. To counteract the negative impact on output, a central bank might increase the money supply to stimulate economic activity.

An Adverse Supply Shock Causes Output to