Arguments in Favor of Passive Economic Policy Include All of the Following

question 92

Multiple Choice

Arguments in favor of passive economic policy include all of the following except:

• A) monetary and fiscal policies work with long and variable lags, which can produce destabilizing results.
• B) economic forecasts have too large a margin of error to be useful in formulating stabilization policy.
• C) recessions do not reduce economic well-being, so using monetary and fiscal policy for stabilization is unnecessary.
• D) the Great Depression could have been avoided if the Federal Reserve had pursued a policy of steady money growth.

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Definitions:

Going Prices

Going prices refer to the current rates or charges for goods and services in a market.

Utility Function

A mathematical representation of how different quantities of goods or services can provide varying levels of satisfaction or utility to an individual.

Labor Income

Earnings obtained from employment, including wages, salaries, and benefits.

Gross Demands

The total quantity of goods or services demanded across all consumers in the market before accounting for net effects such as substitution or income changes.