An accommodating policy response to a supply shock
A)reduces the expected inflation rate.
B)maintains a fixed growth rate of nominal GDP.
C)eliminates the additional inflation caused by the supply shock.
D)none of these

Question

Quizplus · Accepted Answer

An accommodating policy response to a supply shock typically involves adjusting monetary policy to offset the negative effects of the shock on output or employment, rather than focusing on reducing or eliminating the additional inflation caused by the supply shock. Therefore, it does not necessarily reduce the expected inflation rate, maintain a fixed growth rate of nominal GDP, or eliminate the additional inflation directly.

An Accommodating Policy Response to a Supply Shock