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Moderate

Negative Supply Shocks FED Policy

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When the FED targets nominal income as a way of dealing with a negative supply shock it is a favorable decision because

A

interest rates will climb as a result of such targeting.

B

it splits the negative effects between income loss and price level increases.

C

it completely erases the negative shock issues by stimulating Aggregate Demand.

D

it stops deficit spending by the Government.

E

it forces Governments to increase spending.