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Benefits and Costs of Passive and Active Approaches

Economics
Tutor: None Selected Time limit: 0 Hours

What are the benefits and the cost of using a passive approach or an active approach when conducting economic policy? Please be sure to state both the benefits and the costs for both approaches.

Dec 3rd, 2014

An active approach when conducting economic policy has the benefit of minimizing negative impacts to the economy  such as reduction in GDP or an increase in unemployment. In contrast, a passive approach allows the economy to stabilize in the event an irrational exuberance has occurred.  In addition, this approach  reduces the chances of overheating an economy.

The cost of an active approach is usually high, for instance if unemployment is going up, a country has to spend a large sum to provide jobs by creating jobs related to infrastructure.  However, a passive approach may not cost very much initially but later on it may become very costly to take corrective actions if the economy is going downhill.

Dec 3rd, 2014

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Dec 3rd, 2014
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Dec 3rd, 2014
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