If a real economic shock shifts the LRAS curve to the left,which of the following will NOT further reduce real GDP growth and inflation?
A) a decrease in money growth
B) uncertainty that reduces consumption
C) a monetary policy rule that is credible
D) loss of market confidence about the power of monetary policy

Question

Quizplus · Accepted Answer

A credible monetary policy rule can help anchor inflation expectations and provide certainty to economic agents, which can mitigate the negative effects of a leftward shift in the LRAS curve. A decrease in money growth can help reduce inflation but can also further reduce real GDP growth. Uncertainty that reduces consumption and loss of market confidence about the power of monetary policy can both exacerbate the negative effects of the economic shock.

If a Real Economic Shock Shifts the LRAS Curve to the Left,which