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 will 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 will 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 2
Which of the following is consistent with an active approach to policy?
a. The natural rate of unemployment being uncertain
b. Wages and prices being relatively quick to adjust
c. The short-run aggregate supply curve being slow to shift in the presence of a recessionary gap
d. The size of the multiplier being irrelevant
e. The aggregate demand curve being slow to shift in the presence of a recessionary gap
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