Classical economists would cite all of the following as reasons why the government cannot smooth out the business cycle EXCEPT that
A)only productivity shocks can cause real fluctuations in the business cycle.
B)the government has imperfect knowledge of the economy.
C)political constraints on policy actions prevent the government from carrying out effective policies.
D)time lags between the onset of a recession and the implementation of effective countermeasures make anti-recessionary macroeconomic policies impractical.

Question

Quizplus · Accepted Answer

Classical economists believe that the business cycle is caused solely by productivity shocks, so they would not cite this as a reason why the government cannot smooth out the business cycle. The other three options are reasons that classical economists would consider valid.

Classical Economists Would Cite All of the Following as Reasons