Explain Why Each of the Following Statements Is a Rationale

question 21

Essay

Explain why each of the following statements is a rationale for conducting active or passive policy: a. Economic circumstances can change dramatically between the time that an economic downturn begins and the time when policy actions have an effect on the economy.
b. Economists are not very accurate forecasters.
c. Increases in government spending generate increases in economic output.
d. Fluctuations in economic output have been less severe since World War II.

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Definitions:

Additional Costs

Expenses incurred beyond the initial purchase price or budgeted amounts, often unexpected or unplanned for.

Variable Costs

Expenses that change in proportion to the activity or volume of a business, such as materials and labor costs.

Labor

The work performed by individuals that contributes to the production of goods and services in an economy.

Variable Costs

Expenses that vary in direct proportion to the level of production or sales volume, such as materials and labor.