Policy makers should use a variety of fiscal and monetary policy measures to stabilize the economy since
A)this will shorten any policy lags
B)this will always maintain full employment
C)this will eliminate multiplier uncertainty
D)there is a chance that errors in estimating one multiplier will be offset by errors in estimating another
E)none of the above

Question

Quizplus · Accepted Answer

Using a variety of fiscal and monetary policy measures can help mitigate the risk of errors in estimating the impact of a single tool. For example, if there is uncertainty about the magnitude of the government spending multiplier, paired with uncertainty about the impact of interest rate changes on investment, using a combination of both tools can help offset any errors in estimation. However, this approach does not guarantee full employment or eliminate policy lags.

Policy Makers Should Use a Variety of Fiscal and Monetary