Why Should Policymakers NOT Try to Stabilize the Economy

question 98

Multiple Choice

Why should policymakers NOT try to stabilize the economy?

• A)because recessions represent a waste of resources
• B)because pessimism on the part of households and firms may become a self-fulfilling prophecy
• C)because "leaning against the wind" requires policymakers to increase aggregate demand in recessions and reduce aggregate demand in booms
• D)because macroeconomic theory is not developed sufficiently to show policymakers how to change aggregate demand

---

Definitions:

Hypothesis

A proposed explanation made on the basis of limited evidence as a starting point for further investigation.

Predicted Salary

An estimate of the amount of money an individual is expected to earn in a specific role or job position.

Years Of Education

The total number of years an individual has spent in formal education systems, including primary, secondary, and tertiary education.

Standardized Test

A test that is administered and scored in a consistent, or "standard", manner, often used in education to assess the abilities, aptitude, or achievement levels of students.