Which of the following is NOT an argument of non-activists?
A) private expenditures tend to be stable
B) monetary policy is impotent relative to fiscal policy
C) prices are flexible in the long-run
D) government actions may be destabilizing

Question

Quizplus · Accepted Answer

This is actually an argument made by some activist economists who believe that fiscal policy (government spending and taxation) is a more effective tool for stabilizing the economy than monetary policy (adjusting the money supply and interest rates). The other three choices are all arguments that non-activist economists might make. Private expenditures (consumer and business spending) tend to be relatively stable and less volatile than government spending, which can change rapidly due to political factors. Prices are thought to be flexible in the long-run, meaning that they will tend to adjust to changes in supply and demand over time, although there may be short-term deviations from equilibrium. And some non-activist economists argue that government actions to stabilize the economy, such as increasing spending or cutting taxes during a recession, may actually have negative unintended consequences or lead to long-term problems, such as inflation or a larger national debt.

Which of the Following Is NOT an Argument of Non-Activists