Inflation shocks and shocks to potential output are called _________ shocks.
A) monetary policy
B) fiscal policy
C) structural policy
D) aggregate demand
E) aggregate supply

Question

Quizplus · Accepted Answer

Inflation shocks and shocks to potential output affect the aggregate supply in the economy, thus they are called aggregate supply shocks. The other options (monetary policy, fiscal policy, and structural policy) refer to policy actions taken by governments or central banks, not to shocks that affect the economy. Aggregate demand shocks, meanwhile, refer to changes in consumer or investment spending that affect the overall level of demand in the economy.

Inflation Shocks and Shocks to Potential Output Are Called _________