Advocates of Passive Policy Argue That Because Monetary and Fiscal

question 3

Multiple Choice

Advocates of passive policy argue that because monetary and fiscal policy lags are:

• A) short and fixed, these policies should not be used to offset shocks.
• B) long and variable, these policies should not be used to offset shocks.
• C) short and fixed these, policies should be used to offset shocks.
• D) long and variable these, policies should be used to offset shocks.

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Definitions:

Nominal Value of Output

The gross value of all goods and services produced, measured using current prices without adjusting for inflation.

Money Supply

The total amount of monetary assets available in an economy, including cash and deposits.

Price Level

The total economy’s current average pricing for goods and services produced.

Real GDP

Gross Domestic Product adjusted for inflation, representing the value of all goods and services produced over a specific period, measured in constant prices.