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Makaryous Kelini
on Nov 16, 2024

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If there is an adverse supply shock and the Federal Reserve responds by increasing the growth rate of the money supply, then in the short run the Federal Reserve's action

A) lowers both inflation and unemployment.
B) lowers inflation but raises unemployment.
C) raises inflation but lowers unemployment.
D) raises both inflation and unemployment.

Adverse Supply Shock

An unexpected event that suddenly decreases the supply of a product or commodity, leading to higher prices and potential scarcity.

Federal Reserve

The central banking system of the United States, responsible for implementing the country's monetary policy.

Money Supply

The entire amount of financial assets existing in an economy at a certain time.

  • Characterize the impact of supply disruptions on economic productivity, inflationary trends, and the Phillips curve.
  • Learn about the potentials and limitations of central bank actions in responding to adverse economic shocks.
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kunga namgyalNov 17, 2024
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