If the time for an economy to self-correct is shorter than the active policy lags,then:
A)active policy should be strengthened.
B)active policy is likely to destabilize the economy.
C)time is required to accumulate evidence that the economy is performing below its potential.
D)the aggregate demand curve shifts more rapidly than the short-run aggregate supply curve.
E)active policy will work better than passive policy.

Question

Quizplus · Accepted Answer

If the time for an economy to self-correct is shorter than the active policy lags, it means that the economy is already in the process of correcting itself. If active policy is implemented in this situation, it is likely to disrupt the natural correction process and potentially destabilize the economy. Therefore, it is best to avoid active policy in this situation and let the economy self-correct.

If the Time for an Economy to Self-Correct Is Shorter