Question

Suppose that welfare gains derived from eliminating output (and unemployment) fluctuations in the economy can be measured. Assuming these gains are relatively small for the average individual, how do you think this measurement would affect the activist/ nonactivist debate?

Short answer

Government policies provide greater and larger welfare improvements than activist-led efforts.

Step-by-step solution

Step 1. Introduction

An activist is a person or a group of people who organise operations in attempt to effect various economic or political changes.

The welfare gain in the economy occurs when an economy benefits from an increase or decrease in the consumption and production capacities of its citizens.

Step 2. Explanation

According to the beliefs of Robert Lucas, a well-known economist, an economy reacts to numerous changes made in the name of stabilisation in the long run rather than the short run. As a result, activist stabilisation is a part of the short-term advantages that an economy may experience, but in the long run, the government's monetary and fiscal policies serve to stabilise general economic swings.

As a result, government policies provide greater and larger welfare improvements than activist-led efforts.