In 2020, both the Federal Government and the Federal Reserve used the tools at their disposal to respond to the economic downturn. These aggressive actions played a large role in creating today's high levels of inflation. Why would we suspect fiscal and monetary policy to lead to inflation in this case?

Group of answer choices

We were experiencing an aggregate demand shock, and these tools are better suited to deal with real shocks

We were experiencing a real shock, and these tools are better suited to deal with aggregate demand shocks

Wages and prices were not as sticky as the model generally assumes

Aggregate demand doesn't respond well to fiscal and monetary policy