Answer:
The correct answer is the option A: Is less likely to advocate expansionary fiscal policy when the economy is in a recessionary gap than Jones, who believes the economy is not self-regulating.
Explanation:
On the one hand, in the macroeconomics theory when it comes to terms of self-regulating it means that the economy does not need the intervention of the government in order to act properly and satisfy everyone in it.
On the other hand, when it comes to expansionary policy the term is most likely to belong to a situation in where the government does intervene in the economy and therefore that it will try to expand the taxes or other fiscal rates that will improve the collection of the state itself.
And that is why that if Smith believes in self-regulating economies then he will not be in favor of a expansionary fiscal policy in a recessionary gap because he will believe that the economy will fix itself in the right time.
Considering the macroeconomic theory, if Smith believes the economy is self-regulating, then Smith "is less likely to advocate expansionary fiscal policy when the economy is in a recessionary gap than Jones, who believes the economy is not self-regulating."
This is because when the economy is self-regulating, regardless of how the economy is currently, the economy will revert to normal sooner without the government trying to change the situation.
Thus, in a situation whereby there is a recessionary gap, someone who believes that the economy is self-regulating would be less likely to advocate expansionary fiscal policy.
Expansionary fiscal policy is the policy that injects more money supply into the economy.
The recessionary gap occurs when the economy functions below the average rate, usually due to a low money supply.
Hence, in this case, it is concluded that a correct answer is an option. A.
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