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Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985

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BuyFindarrow_forward

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985
Textbook Problem

Policymakers who want to stabilize the economy must decide how much to change the money supply, government spending, or taxes. Why is it difficult for policymakers to choose the appropriate strength of their actions?

To determine

Economy stabilization and difficulties in choosing appropriate strength of actions.

Explanation

It is more difficult to engage in active stabilization policy, as the economy will not respond immediately to policy changes (both monetary and fiscal policies). This is because the economy works with a lag, and since the ability to forecast future economic conditions is poor, it may result in a...

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