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Unformatted text preview: Active policy, while simple, is open to a number of difficulties. Because it relies on the actions and experiences of the policymakers in the Fed and in the government, the weaknesses or prejudices of these policymakers can be translated into official economic policy. For instance, during election years, a central banker may pursue policy that enables the economy to grow in the short run, regardless of the long-term effects, in order to help a candidate. On the other hand, the central banker may contract the economy to hurt a candidate. Similarly, it would be possible for the policymakers to pursue policies that achieve their selfish ends rather than those that are best for the economy at large. Finally, with active policy, policymakers can say one thing and do another. There may be benefits to making the public believe that something different is another....
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This note was uploaded on 12/13/2011 for the course ECO 1310 taught by Professor Staff during the Fall '10 term at Texas State.
- Fall '10