The impact of monetary shocks on the economy can be severe from "summary" of A Monetary History of the United States, 1867-1960 by Milton Friedman,Anna Jacobson Schwartz
Monetary shocks, when they occur, can have a profound and lasting effect on the economy. These shocks, often caused by sudden changes in monetary policy or unexpected events in the financial markets, can disrupt the normal functioning of the economy and lead to significant consequences for businesses and households. One of the key ways in which monetary shocks impact the economy is through their effect on interest rates. When there is a sudden change in monetary policy, such as an increase in the money supply or a change in the interest rate, interest rates in the economy can rise or fall sharply. This can have a direct impact on the cost of borrowing for businesses and consumers, leading to changes in investment and consumption decisions. Furthermore, monetary shocks can also affect the overall level of economic activity in the...
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