Private investment fluctuates ________,which supports those economists who advocate policy ________.

Question

Quizplus · Accepted Answer

Private investment fluctuates procyclically, which supports those economists who advocate policy activism. Procyclical means that private investment moves in the same direction as the business cycle. When the economy is growing, private investment increases. When the economy is contracting, private investment decreases. This is because businesses are more likely to invest when the economy is growing and they are less likely to invest when the economy is contracting. Policy activism means that the government should use fiscal and monetary policy to stabilize the economy. This can be done by increasing government spending and/or decreasing taxes during a recession and by decreasing government spending and/or increasing taxes during an expansion.

Private Investment Fluctuates ________,Which Supports Those Economists Who Advocate Policy