Those who favor a passive approach to policy often argue that changes in prices and wages will shift the:
A)short-run aggregate supply curve before active policy shifts the aggregate demand curve.
B)short-run aggregate supply curve only after active policy shifts the aggregate demand curve.
C)short-run aggregate supply curve more than active policy shifts the aggregate demand curve.
D)short-run aggregate supply curve less than active policy shifts the aggregate demand curve.
E)short-run aggregate supply curve in a direction opposite the shift in the aggregate demand curve

Question

Quizplus · Accepted Answer

Supporters of a passive policy believe that changes in prices and wages will naturally adjust the economy without the need for active intervention. Therefore, they argue that changes in short-run aggregate supply will occur before any policy actions to shift aggregate demand. This is because changes in prices and wages can quickly affect the behavior of businesses and individuals, while policy actions may take longer to have an impact.

Those Who Favor a Passive Approach to Policy Often Argue