Which of the following is a difference between an active approach to close a recessionary gap and a passive approach to close a recessionary gap?
A) The level of real GDP would be higher in the long run with the active approach, while it would be lower with the passive approach.
B) The level of real GDP would be lower in the long run with the active approach, while it would be higher with the passive approach.
C) The price level would be higher and the level of real GDP would be lower in the long run with the active approach, whereas the price level would be lower and real GDP level would be higher with the passive approach.
D) Only the price level would be lower in the long run with the active approach, whereas it would be higher with the passive approach.
E) Only the price level would be higher in the long run with the active approach, whereas it would be lower with the passive approach.

Question

Quizplus · Accepted Answer

An active approach to close a recessionary gap typically involves using fiscal or monetary policy to stimulate the economy, which can lead to higher price levels in the long run due to increased demand. In contrast, a passive approach relies on the economy's natural adjustment mechanisms, which might not result in higher price levels.

Which of the Following Is a Difference Between an Active