Consider the issues below that must be assessed in determining the desirability

Question

Consider the issues below that must be assessed in determining the desirability of active versus passive polleymaking dentify which of these are associated with economists who contend that active policymaking is justfied and which are associate with ecmists who contend that passive polleymaking is sdfed Phillips curve inflation-unemplayment trade-off Stable n the short run; perhaps pre inte ing Aggregate demand shocks Induce short-run and perhaps long-un elfects on rea GOP and unemployment Aggregate supply shocks Cause movements in real GOP and unemployment and hence explain most business cycles

Explanation / Answer

Consider the given problem,

“PC inflation-unemployment trade-off”, stable in the SR, perhaps predictable in the LR, “Passive”.

“AD shocks”, induce SR and perhaps LR effects on real GDP and unemployment “Active”.

“AS shocks”, cause movements in real GDP and unemployment and hence explain most business cycles, “Active”.

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