Economists debate whether the Federal Reserve, Congress, and the president should adopt an activist stabilization policy that

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Economists debate whether the Federal Reserve, Congress, and the president should adopt an activist stabilization policy that attempts to “finetune” the economy—that is, smooth almost every fluctuation in GDP or inflation—or, instead, adopt a policy that focuses on long-run objectives, such as low inflation or steady economic growth, and restrict the use of activist policy to fighting major downturns in the economy. Does the reality that policymakers must rely on “real-time data” (data available at the time the Fed makes its decision) that is subject to revisions weaken or strengthen the argument against finetuning the economy with activist stabilization policy? Briefly explain.

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Money, Banking, and the Financial System

ISBN: 978-0134524061

3rd edition

Authors: R. Glenn Hubbard, Anthony Patrick O'Brien

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