Which of the following is consistent with an active approach to policy?
A)The natural rate of unemployment is uncertain.
B)Wages and prices adjust relatively quickly.
C)The short-run aggregate supply curve is slow to shift in the presence of a recessionary gap.
D)The size of the multiplier is irrelevant.
E)Self-correction lags are not a problem.

Question

Quizplus · Accepted Answer

An active approach to policy involves government intervention to address economic issues, such as a recessionary gap. If the short-run aggregate supply curve is slow to shift, it suggests that the economy is not self-correcting quickly, thus justifying active policy measures.

Which of the Following Is Consistent with an Active Approach