In practice, it is difficult to keep inflation and output from fluctuating when aggregate expenditures change because:
A)It takes time for policymakers to recognize that shifts have occurred
B)Changes in interest rates do not have an immediate impact on the economy
C)Changes in consumer or business confidence can be very difficult to recognize as they are occurring
D)All of the answers given are correct

Question

Quizplus · Accepted Answer

All of the given options are correct. It does take time for policymakers to recognize shifts in aggregate expenditures, changes in interest rates can take some time to impact the economy, and changes in consumer or business confidence can be difficult to recognize as they are occurring. Due to these factors, it can be challenging to keep inflation and output from fluctuating when aggregate expenditures change.

In Practice, It Is Difficult to Keep Inflation and Output