Those who favor an active approach to policy believe that _____
A) discretionary monetary policy cannot be used to help an economy since monetary policy lags are long.
B) discretionary fiscal policy cannot be used to help an economy since fiscal policy lags are long.
C) the lags associated with implementing policies are too long and unstable for discretionary policy to be effective.
D) despite the lags involved, implementing discretionary policy is preferable to inaction.
E) discretionary fiscal policy cannot be used to help an economy since it leads to inflation.

Question

Quizplus · Accepted Answer

Those who favor an active approach to policy believe that even though there may be lags involved in implementing discretionary policy, it is still preferable to inaction. Therefore, option D is the correct answer. Options A, B, and E are incorrect because they either relate to specific types of policy (monetary or fiscal) or make false statements about the effectiveness of these policies. Option C is partially correct but not the best answer since it only describes the potential downside of discretionary policy without acknowledging its potential benefits.

Those Who Favor an Active Approach to Policy Believe That