Conducting fiscal policy so that G = T + β (u - u_n), where G is government expenditures, T is tax revenue, u is the unemployment rate, u_n is the natural rate of unemployment, and β is a positive number, is an example of a(n): A)active rule. B)passive rule. C)discretionary policy. D)automatic stabilizer.

Question

Quizplus · Accepted Answer

This is an active rule because it involves a deliberate policy action where government expenditures are adjusted based on the deviation of unemployment from its natural rate.

Conducting Fiscal Policy So That G = T + β