Policymakers Following a "Lean Against the Wind" Policy Would

question 9

Multiple Choice

Policymakers following a "lean against the wind" policy would

• A)increase government expenditures when output is low and decrease them when output is high.
• B)increase government expenditures when output is low and do nothing when output is high.
• C)decrease government expenditures when output is low and increase them when output is high.
• D)decrease government expenditures when output is high and do nothing when output is low.

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Definitions:

General Equilibrium Analysis

A method in economics that attempts to understand how supply and demand interact across multiple markets simultaneously, and how they reach a state of balance.

Feasible Allocation

In economics, it refers to the distribution of resources or goods in such a manner that it is possible given the available supply.

Second Welfare Theorem

An economic principle stating that under certain conditions, any efficient allocation of resources can be attained through a competitive equilibrium, assuming perfect markets and price flexibility.

Pareto Optimal

A distribution state of resources where trying to improve the status of one individual inevitably leads to the decline of another's.