Question

The use of macroeconomic analysis to help the federal government design policies that help the economy run more efficiently is__________

A) An absolute necessity, according to economists.
B) A practice suggested by politicians but not by economists.
C) A controversial question among economists.
D) Ideal in theory but nonexistent in practice because our knowledge of the economy as a whole is in fact very limited.

Answer 1

The question of whether macroeconomic analysis should guide government policies is controversial among economists due to the timing, implementation lags, and potential for exacerbating economic cycles. Option C.

Step-by-step explanation:

The use of macroeconomic analysis for designing federal government policies aimed at efficient economic functioning is a controversial question among economists.

Keynesian macroeconomic policy is rooted in the belief that the government can manage aggregate demand through fiscal policy - adjustments in taxes and government spending

. However, challenges like delayed GDP reports, political processes, economic implementation lags, and the average duration of recessions imply that by the time such policies are activated, they might not only be untimely but could potentially worsen economic cycles.

Some neoclassical economists argue that many business cycles result from flawed governmental policies. Hence, economists and policymakers advocate for a practical approach to economic policy.

This approach involves recognizing the specific strengths and weaknesses of markets and the government, rather than assuming one or the other is always beneficial or harmful.

Ultimately, American macroeconomic tools such as the central bank's monetary policy and Congress's fiscal policy are aimed at goals like improving the standard of living, reducing unemployment, and maintaining low inflation. Option C.