Stabilization policy is to be applied if all of the following applies except

Question

Quizplus · Accepted Answer

Stabilization policy is designed to address output gaps, which are the difference between actual output and potential output. Therefore, if there is no output gap, stabilization policy is unnecessary. The other three conditions (having good information, the ability to apply policies quickly, and markets being out of equilibrium) are all important for effective application of stabilization policy.

Stabilization Policy Is to Be Applied If All of the Following