Why should policymakers NOT try to stabilize the economy?
A) Recessions represent a waste of resources.
B) Pessimism on the part of households and firms may become a self-fulfilling prophecy.
C) "Leaning against the wind" requires policymakers to increase aggregate demand in recessions and reduce aggregate demand in booms.
D) Economic conditions can easily change between the time when a policy action begins and when it takes effect.

Question

Quizplus · Accepted Answer

Economic conditions can change quickly and trying to stabilize the economy may not be effective or may even have unintended consequences. Additionally, policymakers may not have all the necessary information to make accurate predictions about the economy. Therefore, it may be better to focus on establishing long-term policies that promote growth and stability rather than trying to intervene in short-term fluctuations.

Why Should Policymakers NOT Try to Stabilize the Economy