Which of the following is consistent with an active approach to policy?
A) Wages and prices adjust relatively quickly.
B) The short-run aggregate supply curve is slow to shift in the presence of a recessionary gap.
C) The size of the multiplier is irrelevant.
D) Self-correction lags are NOT a problem.

Question

Which of the following is consistent with an active approach to policy?  
A) Wages and prices adjust relatively quickly. 
B) The short-run aggregate supply curve is slow to shift in the presence of a recessionary gap. 
C) The size of the multiplier is irrelevant. 
D) Self-correction lags are NOT a problem.

Quizplus · Accepted Answer

An active approach to policy often involves intervention to correct economic issues such as recessionary gaps. This approach assumes that without intervention, adjustments in the economy, such as shifts in the short-run aggregate supply curve, may be slow, thereby justifying the need for policy actions to speed up recovery.

Which of the Following Is Consistent with an Active Approach