What strategy did Yasushi Mieno, Governor of the Bank of Japan, believe was appropriate in the face of declining aggregate output in Japan in the early 1990s?
A)He decided to use an expansionary monetary policy.
B)He decided to advise the Japanese government to use an expansionary fiscal policy, while keeping monetary policy neutral.
C)He decided to rely on economic expansion in the United States to increase demand for Japanese products.
D)He decided to wait for downward adjustment of the price level.

Question

Quizplus · Accepted Answer

Yasushi Mieno believed that waiting for a downward adjustment of the price level was the appropriate strategy in the face of declining aggregate output in Japan in the early 1990s. Mieno believed that it was necessary for the economy to experience a period of lower prices to correct for the previous period of high prices, known as the "bubble economy." This strategy is known as "waiting for the markets to clear" and involves allowing prices and wages to adjust downward until equilibrium is reached.

What Strategy Did Yasushi Mieno, Governor of the Bank of Japan