00:01
The government has the ability to influence the level of output in the short run using monetary and fiscal policy.
00:08
There is some disagreement as to whether the government should attempt to stabilize the economy.
00:13
Which are the following are arguments in favor of active stabilization policy by the government? check all that apply.
00:19
So when we see this statement, check all that apply.
00:21
Remember that it means you are likely to have more than one correct option.
00:25
So choose all of the correct options.
00:28
A, shifts in aggregate demand are often the reason.
00:31
Of waves of pessimism or optimism among consumers and businesses.
00:36
B, the fed can effectively respond to excessive pessimism by expanding the money supply and lowering interest rates.
00:43
C, changes in government purchases and taxation must be passed by both houses of congress and signed by the president.
00:50
D, businesses make investment plans many months in advance.
00:54
So those shifts in aggregate demand that are results of waves of pessimism lead to economic downturns in the economy.
01:01
So waves of pessimism lead to downturns in the economy.
01:18
These downturns are downturns are not due to structural changes within the economy and they're not beneficial.
01:24
They exert unnecessary pressure on the economy.
01:27
Similarly, shifts in aggregate demand that are results of waves of consumer and business optimism are also burdensome and bring about instability...