Question

Which of the following arguments are in favor of active stabilization policy by the government? Check all that apply

Answer 1

Answer:

D) Shifts in aggregate demand are often the result of waves of pessimism or optimism among consumers and businesses.

Explanation:

The Federal Reserve (FED) can respond to excessive pessimism among consumers and businesses by expanding the money supply and lowering interest rates. To deal with excessive optimism they can do the opposite, they can shrink the money supply and increase the interest rate.