Question

How do advocates of discretionary stabilization policy view frequent changes in spending and tax policy?

a. The changes make life more difficult and hectic for Congress and the Fed.

b. The changes smooth out the business cycle, making planning easier.

c. The changes cause more instability in the economy and make planning more difficult.

d. The changes make the economy more difficult to forecast.

Answer 1

Solution:-Option C is correct

C.The changes cause more instability in the economy and make planning more difficult.

Explaination:-The changes cause more instability in the economy and make planning more difficult is a method to advocates of discretionary stabilization policy view frequent changes in spending and tax policy.When aggregate demand is excessive, risking higher inflation, policymakers should cut government spending, raise taxes, and reduce the money supply.When aggregate demand is inadequate to ensure full employment, policymakers should boost government spending, cut taxes, and expand the money supply.unstable and believe that policy can manage aggregate demand to offset the inherent instability.