The existence of lags in the policymaking and implementation process has convinced new Keynesian economists that stabilization policy should
A)not be used.
B)be used only to fine-tune the economy.
C)be used only to fight major downturns in the economy.
D)be used to fight inflations but not to fight recessions.

Question

Quizplus · Accepted Answer

New Keynesian economists acknowledge that there are lags in the policymaking and implementation process, but still believe that stabilization policy can be effective in fighting major downturns in the economy. They argue that policymakers should focus on using policy tools to stabilize the economy when there is a significant recession, rather than trying to fine-tune the economy or combat inflation. Therefore, choice C is the best answer.

The Existence of Lags in the Policymaking and Implementation Process