Attempts to use activist policies to stabilize the economy can be counter-productive:
A)If policy makers do not correctly estimate the natural rate of real output.
B)If policy makers misestimate the lags involved in the process.
C)If policy makers forecast inaccurately.
D)In all of the above cases.

Question

Attempts to use activist policies to stabilize the economy can be counter-productive:
A)​If policy makers do not correctly estimate the natural rate of real output.
B)​If policy makers misestimate the lags involved in the process.
C)​If policy makers forecast inaccurately.
D)​In all of the above cases.

Quizplus · Accepted Answer

All three options listed can result in activist policies being counter-productive. If policy makers do not correctly estimate the natural rate of real output, they may respond in a way that ends up destabilizing the economy. Similarly, if policy makers misestimate the lags involved in the process, their actions may have unintended consequences. Finally, inaccurate forecasting can lead to misguided policies that do more harm than good.

Attempts to Use Activist Policies to Stabilize the Economy Can