Discretionary policy advocates believe:

A) that there is a high cost associated with the use of a discretionary policy.
B) that self-corrective forces in an economy work slowly.
C) that natural adjustments of wages and prices can help attain potential output.
D) in rational expectations.
E) that an active stabilization policy imposes troubling fluctuations in the price level and real GDP.

Discretionary Policy

A policy where government entities, like central banks or governments themselves, decide on actions or measures to take based on current economic conditions.

Self-corrective Forces

Mechanisms within the market economy that work to naturally correct imbalances and return the economy to a state of equilibrium without external intervention.

Rational Expectations

The hypothesis that individuals form forecasts about the future based on all available information in a way that is consistent with the actual structure of the economy.