To Support the Argument for an Active Role for Government

Multiple Choice

To support the argument for an active role for government in stabilizing the economy, it must be TRUE that

A) consumers are not rational and that not all wages and prices are flexible.
B) consumers are not rational and shocks to the economy are primarily due to aggregate demand.
C) government must be able to react quickly enough and that shocks to the economy be primarily due to aggregate supply shocks.
D) shocks to the economy be primarily due to aggregate supply shocks and that consumers are not rational.
E) not all wages and prices are flexible and that government must be able to react quickly enough.