Someone who believes in macroeconomic policy activism is likely to suggest that:
A)changes in the money supply or changes in fiscal policy will most likely destabilize the economy.
B)balancing the government budget is more important than current economic problems.
C)keeping the money supply growing at a constant rate would help the economy.
D)changes in monetary or fiscal policy would smooth out the business cycle.

Question

Quizplus · Accepted Answer

Someone who believes in macroeconomic policy activism would advocate for changes in monetary or fiscal policy to smooth out the business cycle. This means that in times of economic downturns, the government should use expansionary policies such as increasing government spending or lowering interest rates to stimulate economic growth. Conversely, during times of economic expansion, contractionary policies such as reducing government spending or increasing interest rates should be used to prevent inflation. Maintaining a constant growth rate of the money supply, as suggested in choice C, is a component of monetary policy activism, but not the main focus. Believing that changes in monetary or fiscal policy would destabilize the economy, as suggested in choice A, would be contrary to the belief in macroeconomic policy activism. Believing that balancing the government budget is more important than current economic problems, as suggested in choice B, would be more characteristic of a belief in fiscal conservatism.

Someone Who Believes in Macroeconomic Policy Activism Is Likely to Suggest