The Fed can fight the inflationary effects of a negative real shock by decreasing money growth.

Name: The Fed can fight the inflationary effects of a negative real shock by decreasing money growth.
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Question

Quizplus · Accepted Answer

When there is a negative real shock, it usually results in a decrease in output and an increase in prices which can lead to inflation. The Fed can counteract this inflationary pressure by reducing money growth, which would lower aggregate demand and bring prices back down. Therefore, the statement is true.

The Fed Can Fight the Inflationary Effects of a Negative