Excessive use of monetary or fiscal policies to achieve stabilization may:
A) require the cooperation of firms and the public in order to be effective.
B) backfire if the economy becomes destabilized through erratic application.
C) never be necessary as long as the economy can rely on automatic stabilizers.
D) be better than weaker measures that may not hit the target.

Question

Quizplus · Accepted Answer

Excessive use of monetary or fiscal policies can backfire if the economy becomes destabilized through erratic application. Monetary and fiscal policies work best when used in moderation and with a clear understanding of their potential effects on the economy. Excessive use can lead to unintended consequences, such as inflation or recession.

Excessive Use of Monetary or Fiscal Policies to Achieve Stabilization