Policymakers' use of stabilization policy to eliminate output gaps is more appropriate when an economy self corrects very and when the output gap is very
a. rapidly; large
b. rapidly; small
c. slowly; small
d. slowly; large

D

Explanation: The output gap is one of the indicators that recieves alot of attention from both academics and analysts due its fundamental importance when estimating or calculating the economic development. This indicator although very important has always drawn attention due to its complicity and unobservable nature. The output gap can be defined as the difference between the actual GDP and the potential GDP. It serves as an indicator to show whether or not the economy is operating below or above its capacity. It also predicts the inflationary pressure.

b is the correct answer