Policy makers are said to “accommodate” an adverse supply shock if they ?

A. fail to respond to the adverse supply shock and allow the economy to adjust on its own.
B. respond to the adverse supply shock by decreasing aggregate demand which lower prices
C. respond to the adverse supply shock by decreasing short run aggregate supply
D. respond to the adverse supply shock by increasing aggregate demand, which further raises prices

Correct Answer: respond to the adverse supply shock by increasing aggregate demand, which further raises prices ✔

Last Updated: June 18, 2019