An advantage of stabilizing macroeconomic policy over economic self-correction is that:
A) stabilization policies achieve potential output with a lower aggregate price level.
B) economic self-correction can take a decade or more.
C) economic self-correction affects the aggregate price level but not the aggregate output level.
D) stabilization policies are particularly effective to address supply shocks.

Question

Quizplus · Accepted Answer

Economic self-correction mechanisms, such as adjustments in wages and prices, can indeed take a long time, potentially a decade or more, to restore an economy to its potential output. Stabilization policies, on the other hand, are government interventions designed to shorten the duration of economic corrections by adjusting fiscal and monetary policies.

An Advantage of Stabilizing Macroeconomic Policy Over Economic Self-Correction Is