For those who favor an active approach, public policy changes are necessary to cure a contractionary 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 AD curve
D)real wages must fall through price increases rather than waiting for money wages to fall
E)falling money wages will cause the AD curve to shift leftward unless policy counters this movement

Question

Quizplus · Accepted Answer

An active approach suggests that real wages must fall through price increases rather than waiting for money wages to fall, as prices and wages are often sticky downward.

For Those Who Favor an Active Approach, Public Policy Changes