Classical economists would cite all of the following as reasons why the government cannot smooth out the business cycle except that
A) only productivity shocks can cause real fluctuations in the business cycle.
B) the government has imperfect knowledge of the economy.
C) political constraints on policy actions prevent the government from carrying out effective policies.
D) time lags between the onset of a recession and the implementation of effective countermeasures make anti-recessionary macroeconomic policies impractical.
A
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In the Keynesian cross diagram, a decrease in investment spending because companies become more pessimistic about investment profitability causes the aggregate demand function to shift down, the equilibrium level of aggregate output to ________, and
the IS curve to shift to the ________, everything else held constant. A) rise; left B) rise; right C) fall; left D) fall; right
Every society must deal with the problem of scarcity because:
a. people do not have enough money to buy everything they need. b. government levies heavy taxes on households and firms. c. human beings become satiated as consumption increases. d. human wants are nearly unlimited relative to the availability of resources. e. productive resources, technology, and labor are unlimited.