Advocates of passive policy argue that because monetary and fiscal policy lags are:
A) short and fixed, these policies should not be used to offset shocks.
B) long and variable, these policies should not be used to offset shocks.
C) short and fixed these, policies should be used to offset shocks.
D) long and variable these, policies should be used to offset shocks.

Question

Quizplus · Accepted Answer

Advocates of passive policy argue that monetary and fiscal policy lags are long and variable, meaning that policy decisions cannot be implemented quickly enough to effectively offset shocks. Therefore, they argue that policy should not be actively used to try and stabilize the economy, but instead should focus on creating a stable environment through structural reforms and stable institutional frameworks.

Advocates of Passive Policy Argue That Because Monetary and Fiscal