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

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Definitions:

Isabella d'Este

An influential Renaissance art patron and political leader, known for her refined taste and collection of art.

Titian

A leading figure of the Italian Renaissance, Titian was renowned for his masterful use of color and innovative compositions in portraits and religious works.

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A sale event, often organized by a community or organization, where used goods are sold, typically to raise funds.

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The market value of all final goods and services produced within a country in a given period, measured without adjusting for inflation.