If a group of economists believes the following points are TRUE, which is likely to be their policymaking 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 mentioned in the question are likely to support passive policymaking since they believe that aggregate demand shocks have no long term effects on real GDP or unemployment, and that the Phillips Curve trade-off does not exist in the long term. This suggests that the economy is self-correcting and that government intervention is not necessary. The belief in widespread pure competition and flexible real wages further reinforce their support for a hands-off approach to policymaking.

If a Group of Economists Believes the Following Points Are