If a group of economists believes the following points are true, which is likely to be their policy making stance?
∙ Aggregate demand shocks have no long run effect on real Gross Domestic Product (GDP)or unemployment.
∙ Pure competition is widespread throughout the economy.
∙ Real wages are flexible.
∙ The Phillips Curve trade-off does not exist in the long run.

Question

Quizplus · Accepted Answer

The economists who believe in the points above are likely to support a passive policy making stance, as they believe that the economy is self-correcting and that government intervention may not have a significant impact in the long run. They believe that markets are efficient and adjust quickly to any shocks or changes, indicating that a "hands-off" approach is preferable to an active or discretionary policy making stance.

If a Group of Economists Believes the Following Points Are