If it is clear that a disturbance is only transitory, the best policy response often is to
A)react moderately or not at all because any policy action may itself be destabilizing
B)use only monetary policy since its effects are less powerful than fiscal policy
C)act quickly and vigorously since another disturbance may follow soon
D)use only fiscal policy since its impact is more direct and immediate
E)use an expansionary fiscal/restrictive monetary policy mix to avoid inflationary pressure

Question

Quizplus · Accepted Answer

If the disturbance is only transitory, reacting too quickly or too forcefully might lead to unintended consequences and create more instability in the economy. Therefore, a moderate or no policy response is often the best approach.

If It Is Clear That a Disturbance Is Only Transitory