Economists say that central bankers face a \"cruel trade-off\" between the rates

Question

Economists say that central bankers face a "cruel trade-off" between the rates of inflation and real growth when a potential growth shock hits. What does this mean? Both the inflation rate and real growth rate will increase when a Solow growth shock hits. Both the inflation rate and real growth rate will decrease when a potential growth shock hits. A Solow growth shock will put a stop to international trade. A central bank can meet either its inflation goal or its real growth rate goal but not both. Economists say that central bankers face a "cruel trade-off" between the rates of inflation and real growth when a potential growth shock hits. What does this mean? Both the inflation rate and real growth rate will increase when a Solow growth shock hits. Both the inflation rate and real growth rate will decrease when a potential growth shock hits. A Solow growth shock will put a stop to international trade. A central bank can meet either its inflation goal or its real growth rate goal but not both.

Explanation / Answer

The central bank cannot simultaneously raise money growth and lower money growth.

D) It can only meet its inflation goal or its real growth goal, not both.

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