Which of the following statements concerning stabilization policy is correct?
A)Increasing government spending during an economic boom would be an example of a stabilization policy.
B)Increasing taxes during a recession would be an example of a stabilization policy.
C)New Keynesian economists are skeptical of the value of stabilization policies.
D)Increasing the money supply during a recession is an example of a stabilization policy.

Question

Quizplus · Accepted Answer

Stabilization policy refers to government actions aimed at reducing the severity of the business cycle fluctuations, especially the booms and busts of the economy. Increasing the money supply during a recession is an example of expansionary monetary policy, which is aimed at boosting aggregate demand and stimulating economic growth.

Which of the Following Statements Concerning Stabilization Policy Is Correct