Arguments in Favour of Passive Economic Policy Include All of the Following

question 65

Multiple Choice

Arguments in favour of passive economic policy include all of the following except:

• A)monetary and fiscal policies work with long and variable lags, which can produce destabilizing results.
• B)economic forecasts have too large a margin of error to be useful in formulating stabilization policy.
• C)recessions do not reduce economic well-being, so using monetary and fiscal policy for stabilization is unnecessary.
• D)it is difficult to assess the effects of different policies on the economy.

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Definitions:

Random Variations

Unpredictable fluctuations that affect data or processes, not attributable to any known cause.

Exponentially Smoothed Forecast

A method of forecasting that gives more weight to recent data points, using exponential smoothing to produce a smoothed time series.

Forecast Error

The difference between the actual value and the predicted value in a forecast, indicating the accuracy of the forecasting process.

Weighting Scheme

A method of assigning different weights or importance to various elements or criteria in order to calculate a composite score or make decisions.