According to those who favor a passive approach to policy, a contractionary gap will be eliminated because
A)prices and wages rise rapidly
B)prices and wages are flexible
C)the aggregate demand curve will shift to the right
D)the economy automatically slows down
E)the aggregate demand curve will shift to the left

Question

Quizplus · Accepted Answer

A passive approach to policy suggests that prices and wages are flexible, allowing the economy to self-correct over time without intervention, thus eliminating a contractionary gap.

According to Those Who Favor a Passive Approach to Policy