The Self-Correcting Character of the ADI-IA Model Implies That the Central

Multiple Choice

The self-correcting character of the ADI-IA model implies that the central bank should

A) never use active monetary policy (i.e. ,shift the policy reaction function) to eliminate output gaps.
B) always use active monetary policy to eliminate output gaps.
C) use active monetary policy to eliminate output gaps only when the self-correcting processes of the economy work very slowly.
D) active monetary policy to eliminate output gaps only when the self-correcting processes of the economy work very rapidly.
E) active monetary policy to eliminate expansionary gaps but not recessionary gaps.