Which of the Following Statements Is CORRECT

question 52

Multiple Choice

Which of the following statements is CORRECT?

• A)If most shocks to the economy are aggregate demand shocks or permanent aggregate supply shocks,then policy that stabilizes inflation will also stabilize economic activity,even in the short run.
• B)If temporary supply shocks are more common,then a central bank must choose between stabilizing inflation and stabilizing output in the short run.
• C)Stabilizing economic activity in response to a temporary supply shock results in a larger deviation of inflation from the inflation target rather than a stabilization of inflation.
• D)all of the above.

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