Author Question: Which of the following statements supports the passive approach to close a recessionary gap? a. It ... (Read 24 times)

deesands · **on:** Jun 30, 2018

Which of the following statements supports the passive approach to close a recessionary gap?
a. It is likely that policies will be subject to time lags.
b. Prolonged unemployment may cause the economy's potential real GDP to fall.
c. Workers' skills may grow rusty during a prolonged recession.
d. It is likely that unemployed workers will drop out of the labor force.
e. Firms may neglect their capital stock during a prolonged recession.

Question 2

If the time for an economy to self-correct is shorter than the active policy lags, then:
a. active policy should be strengthened.
b. active policy is likely to destabilize the economy.
c. time is required to accumulate evidence that the economy is performing below its potential.
d. the aggregate demand curve shifts more rapidly than the short-run aggregate supply curve.
e. active policy will work better than passive policy.