Stabilization policy refers to attempts to
A)shift the AD curve to smooth short-run fluctuations in output.
B)shift the SRAS curve to smooth short-run fluctuations in output.
C)shift the AD curve to keep the price level as low as possible.
D)shift the SRAS curve to keep the nominal interest rate as low as possible.

Question

Quizplus · Accepted Answer

Stabilization policy aims to stabilize the economy by shifting the aggregate demand (AD) curve to smooth short-run fluctuations in output. This can be done through fiscal policy (government spending and taxation) and monetary policy (adjusting interest rates and money supply). By increasing AD during a recession or decreasing it during an expansion, policymakers can help smooth out the business cycle and promote economic stability.

Stabilization Policy Refers to Attempts to