The parable of Riding a Switchback suggest that stabilizing policy ?
Correct answer: C. is stimulating or contracting the economy at the wrong times
- A. is not sufficiently stimulating or contracting the economy at any time
- B. is effective
- C. is stimulating or contracting the economy at the wrong times
- D. is desirable
Explanation
The switchback analogy refers to policy effects arriving after economic conditions have changed because of time lags. Stabilisation policy can therefore stimulate an already recovering economy or contract an already weakening one.
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