Should policy Be Active or Passive? ● Passive o Lags in implementation effects of policies Inside lag outside lag Automatic stabilizers (income tax; unemployment insurance, Martin Weitzman: profit sharing) 66 Should Policy Be Active or Passive? ⚫ Passive ① Lags in implementation & effects of policies --- inside lag --- outside lag Automatic stabilizers (income tax; unemployment insurance; Martin Weitzman: profit sharing)