Economists who view the economy as inherently unstable generally argue that:
A) stabilization policy is too dangerous to be used.
B) the economy should be stimulated when it is depressed and slowed when it is overheated.
C) the economy should be slowed when it is depressed and stimulated when it is overheated.
D) monetary and fiscal policies should follow rigid rules of constant growth.

Question

Quizplus · Accepted Answer

Economists who view the economy as inherently unstable believe that fluctuations in economic activity are a natural part of the business cycle. As such, they argue that the government should take an active role in stabilizing the economy by stimulating it during periods of recession and slowing it down during periods of inflation. This is the essence of stabilization policy. While there may be some risks associated with such policies, economists who see the economy as inherently unstable believe that the benefits of stabilization outweigh the costs.

Economists Who View the Economy as Inherently Unstable Generally Argue