If the Economy Is Hit by a Negative Real Shock

question 205

Multiple Choice

If the economy is hit by a negative real shock that reduces real GDP growth below its long-run potential rate,which of the following is the appropriate monetary policy to move real GDP growth back to the long-run rate without raising inflation?

• A) Increase the growth rate of the money supply.
• B) Decrease the growth rate of the money supply.
• C) Keep the growth rate of the money supply constant while lowering interest rates.
• D) No monetary policy can achieve this goal.

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Definitions:

Anterior Aspect

Refers to the front surface or position of a part of the body.

Hearing Aid

An electronic device designed to improve hearing by making sound audible to a person with hearing loss.

Audiologist

A healthcare professional specializing in identifying, diagnosing, treating, and monitoring disorders of the auditory and vestibular system portions of the ear.

Unaffected Ear

Refers to the ear that is not impacted by a medical condition or treatment in contrast to the affected ear which has a health issue.