Those Who Favor an Active Approach to Policy Believe That

question 28

Multiple Choice

Those who favor an active approach to policy believe that:

• A)discretionary monetary policy cannot be used to help the economy since monetary policy lags are long.
• B)discretionary fiscal policy cannot be used to help the economy since fiscal policy lags are long.
• C)lags associated with implementing policies are too long and unstable for discretionary policy to be effective.
• D)despite the lags involved,implementing discretionary policy is preferable to inaction.
• E)the discretionary fiscal policy cannot be used to help the economy since it leads to inflation.

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Definitions:

Profit Maximizing

The process by which a company determines the price and output level that generates the maximum profit.

Marginal Cost

The supplementary expense incurred from manufacturing one more unit of a good or service.

Price

The amount of money expected, required, or given in payment for something.

Price Rigidity

Characteristic of oligopolistic markets by which firms are reluctant to change prices even if costs or demands change.