In practice, it is difficult to keep inflation and output from fluctuating when aggregate expenditures change because:
A) it takes time for policymakers to recognize that shifts have occurred.
B) changes in interest rates do not have an immediate impact on the economy.
C) changes in consumer or business confidence can be very difficult to recognize as they are occurring.
D) all of the answers given are correct.

Question

Quizplus · Accepted Answer

All of the answers given are correct. Policymakers may not recognize shifts in aggregate expenditures immediately, and even if they do, changes in interest rates can take time to affect the economy. Additionally, changes in consumer and business confidence can be difficult to predict or measure accurately, making it challenging to prevent inflation and output fluctuations.

In Practice, It Is Difficult to Keep Inflation and Output