If output adjusts ________ to the natural rate level,and if time lags between policy actions and changes in aggregate output are relatively ________,then the case for discretionary policy is strengthened.
A)slowly; short
B)slowly; long
C)quickly; short
D)quickly; long

Question

Quizplus · Accepted Answer

The correct answer is A because if output adjusts slowly to the natural rate level, and if time lags between policy actions and changes in aggregate output are relatively short, then the case for discretionary policy is strengthened. This is because discretionary policy can be used to make small, frequent adjustments to aggregate output in order to keep it close to the natural rate level.

If Output Adjusts ________ to the Natural Rate Level,and If