The advantage of government intervention when a shock hits an economy is
A)the composition of output changes.
B)the real interest rate remains unchanged.
C)the real interest rate rises.
D)an efficient outcome is achieved faster.
E)the price level rises.

Question

Quizplus · Accepted Answer

Government intervention can help to stabilize an economy during a shock by implementing policies that can mitigate the negative effects of the shock. This can help to achieve an efficient outcome faster than if the market was left to adjust on its own. For example, government spending can stimulate the economy and help prevent a recession, while monetary policy can lower interest rates and encourage investment and consumption. Overall, government intervention can help to reduce the severity of a shock and speed up the recovery process.

The Advantage of Government Intervention When a Shock Hits an Economy