In the context of growth,the goal of stabilization policy once per capita output is equal to potential per capita output is to
A)insure that the percentage change in per capita output and potential per capita output over time are equal.
B)raise the growth rate of potential per capita output above that of per capita output.
C)raise the growth rate of per capita output above that of potential per capita output.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

Stabilization policy is used to smooth out the business cycle by increasing aggregate demand during recessions and decreasing it during inflationary periods. Once per capita output is equal to potential per capita output, the goal of stabilization policy is to ensure that the percentage change in per capita output and potential per capita output over time are equal, in order to maintain a stable economy and avoid fluctuations. Therefore, choice A is the correct answer. Choice B suggests that the goal is to increase the growth rate of potential per capita output, which is not necessarily the case once the two measures are equal. Choice C is incorrect because it suggests that the goal is to increase the growth rate of per capita output, which may lead to overproduction and inflation. Choice D is incorrect because there is a clear goal for stabilization policy once per capita output is equal to potential per capita output.

In the Context of Growth,the Goal of Stabilization Policy Once