The Fed's objectives present it with a true dilemma when
A) there are demand shocks caused by shifts in money demand
B) there are demand shocks caused by changes in spending
C) there are negative supply shocks
D) cyclical unemployment exists
E) there is member bank opposition

Question

Quizplus · Accepted Answer

Negative supply shocks create a dilemma for the Fed because they can lead to both higher inflation and higher unemployment, making it difficult to address both objectives simultaneously.

The Fed's Objectives Present It with a True Dilemma When