If the short-run equilibrium output of the United States exceeds ...

[daltonest1984]

If the short-run equilibrium output of the United States exceeds the potential output, the Fed:
 a. employs an active monetary policy to close a recessionary gap.
  b. employs an active monetary policy to close an expansionary gap.
  c. relies on a passive approach to close a recessionary gap.
 d. relies on a passive approach to close an expansionary gap.
 e. employs an expansionary fiscal policy.

Question 2

The country of Glassen has experienced an expansionary gap for the last three years. The advocates of passive policy are likely to suggest a policy which causes _____.
 a. the short-run aggregate supply to shift to the left.
 b. the short-run aggregate supply to shift to the right.
 c. rising prices to shift the aggregate demand to the left.
 d. wages to fall relatively quickly.
 e. aggregate demand to shift to the right as wages increase.

[dudman123]

Answer to Question 1

b

Answer to Question 2

a

[daltonest1984]

Correct answers!

[dudman123]

Great! Please up vote