Stabilization policies are policies designed to
A) keep output constant.
B) keep prices constant.
C) move the economy closer to potential output.
D) increase trade.

Question

Quizplus · Accepted Answer

Stabilization policies are designed to smooth out fluctuations in the economy and move it closer to potential output, which is the level of output consistent with full employment of labor and capital resources. This involves using monetary and fiscal policies to manage aggregate demand and stabilize prices and output fluctuations. While stabilizing prices and increasing trade are often related goals, they are not the primary focus of stabilization policies. Keeping output constant is not a realistic goal as the economy is always subject to shocks and fluctuations.

Stabilization Policies Are Policies Designed to