If the Fed reduces $\vec { M }$ to fight inflation after a negative real shock, which of the following should occur?
A) higher inflation
B) lower real growth
C) higher real growth
D) no change in real growth

Question

Quizplus · Accepted Answer

Lower real growth occurs because a reduction in the money supply reduces aggregate demand, which in turn reduces output and employment.

If the Fed Reduces M⃗\vec { M }M To Fight Inflation After a Negative Real Shock, Which of Inflation

If the Fed Reduces $\vec { M }$ To Fight Inflation After a Negative Real Shock, Which of Inflation