For those who favor an active approach, public policy changes are ...

[kshipps]

For those who favor an active approach, public policy changes are necessary to cure a recessionary gap because:
 a. the short-run aggregate supply curve will otherwise shift quickly to the right.
 b. prices and wages are flexible downward but not upward.
 c. the required decrease in output can be achieved only by shifting the aggregate demand curve.
 d. real wages must fall in order to increase aggregate supply in the economy.
 e. falling money wages will cause the AD curve to shift leftward unless policy counters this movement.

Question 2

According to the active policy approach, the elimination of a recessionary policy _____.
 a. can only be achieved by decreasing wages
 b. requires a public policy of wage and price controls
 c. should be accomplished by stimulating aggregate demand
  d. will increase unemployment
 e. will cause a recession

[Viet Thy]

Answer to Question 1

d

Answer to Question 2

c

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