We often say that responding to a negative AD shock is the easiest scenario for the Fed to respond to. However, even the response to a negative AD shock might be difficult, and it's often impossible for the Fed to increase AD the exact amount necessary to offset the shock. Why is that? In other words, why is it easy for the Fed to overshoot or undershoot their stimulus? Explain.

We often say that responding to a negative AD shock is the easiest scenario for the Fed to respond to. However, even the response to a negative AD shock might be difficult, and it's often impossible for the Fed to increase AD the exact amount necessary to offset the shock. Why is that? In other words, why is it easy for the Fed to overshoot or undershoot their stimulus? Explain.

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section: Chapter Questions

Problem 3DQ

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O upp.eduiastic.com/student/ássessment/6081aea8213e430008f3ad18/class/611d518243c10fo0099843cf/uta/619b8b17a411c ols.org bookmarks e Your Eighty Dollar…. sds Question 22/28 > NEXT I BOOKMARK Supply-side egonomists argue that Supply and secure economic prosperity. on businesses (or producers) are the surest way to increase Aggregate A Tax cuts B Tax increases Spending cuts D Spending increases DELL & 7 8 9. 1 4. W e r y W # 个