Which of the Following Should Be Kept in Mind When

question 35

Multiple Choice

Which of the following should be kept in mind when policymakers consider efforts to stabilize the economy?

• A)The economy responds very quickly to changes in the interest rate and changes in economic conditions are easy to predict.
• B)The economy responds very quickly to changes in the interest rate and changes in economic conditions are nearly impossible to predict.
• C)The economy responds to changes in the interest rate with a lag and changes in economic conditions are easy to predict.
• D)The economy responds to changes in the interest rate with a lag and changes in economic conditions are nearly impossible to predict.

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Definitions:

Classical Economists

Economists from the 18th and 19th centuries who focused on ideas of free markets, supply and demand, and the role of government in the economy.

Unemployment

A situation where individuals who are capable and willing to work are unable to find jobs.

Interest Rates

The percentage charged on the total amount of borrowed money, reflecting the cost of debt for the borrower and the return on investment for the lender.

Unintended Inventory Changes

Variations in stock levels that occur when actual sales differ from anticipated sales, not resulting from planned actions by businesses.