A central bank cannot simultaneously stabilize the price level and the real GDP as a response to this brief but abrupt rise in oil prices.
Prices and real GDP will increase in the short term, and both will increase even more in the long term.
The "policy rate" that central banks frequently concentrate on is the short-term, frequently overnight, borrowing rate that banks charge one another. The rate decreases when the central bank adopts a loosening policy, often known as injecting cash into the economy by acquiring or borrowing securities.
The amount that is actually produced is shown by the real GDP. Real GDP eliminates the impact of changes in the general level of prices by measuring aggregate output at constant prices.
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