Compare and contrast the arguments favoring active versus passive ...

[Charlie]

Compare and contrast the arguments favoring active versus passive policy making.
 
  What will be an ideal response?

Question 2

Compared to consumption, investment is a much ________ component of GDP and is much more ________.
 
  A) smaller; volatile B) larger; volatile C) larger; stable D) smaller; stable

[CAPTAINAMERICA]

Answer to Question 1

The models that stress wage and price flexibility and rationality on the part of economic agents tend to favor passive policy making. If people can anticipate policy actions and if wages and prices are flexible, the economy will tend toward long-run equilibrium. Discretionary policies conducted by governmental policy makers will not be effective means of influencing real Gross Domestic Product (GDP). In contrast, economists who conclude that small menu costs are important elements of real-world economies conclude that active policy making can influence real GDP and move the economy toward full employment.

Answer to Question 2

A

[Charlie]

YES! Correct, THANKS for helping me on my review

[cassie_ragen]

Gracias!