Which of the following statements is most correct?
A) Policymakers can eliminate the effects of negative supply shock.
B) Policymakers can neutralize movements in aggregate demand.
C) Policymakers can shift the short-run aggregate supply curve.
D) Shifts in the monetary policy reaction function used to stabilize the economy shift the short-run aggregate supply curve.

Question

Quizplus · Accepted Answer

Policymakers, through the use of monetary and fiscal policies, can neutralize movements in aggregate demand by either stimulating the economy when demand is low or cooling it down when demand is too high. This is a fundamental aspect of macroeconomic policy aimed at stabilizing economic fluctuations.

Which of the Following Statements Is Most Correct