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Unformatted text preview: Passive policy is not immune to the problems that plague active policy, however. For instance, passive policy must be written by policymakers at some point. Thus, policy rules can contain the biases of the policymakers of a different time--biases that are perhaps quite inappropriate to the current economic climate. And any outright errors in judgment or theory made by these policymakers will be incorporated into the rules and will thus be present as long as the rules are in effect. Which method of macroeconomic policy is better? Active policy relies on the judgment and character of policymakers to pursue the optimal long-term policies for the economy. Passive policy takes the power of choice away from policymakers and instead relies on the judgment and character of the writers of the rules. It is not clear that either method of policy is better. The majority of macroeconomic policy in the United States is active....
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This note was uploaded on 02/09/2012 for the course ECO ECO2013 taught by Professor Jominy during the Fall '08 term at Broward College.
- Fall '08