For policymakers who favour an active approach, why are public policy changes considered necessary for curing a recessionary gap?
A) because the short-run aggregate supply curve will otherwise shift quickly to the right
B) because prices and wages are flexible downward but NOT upward
C) because the required decrease in output can be achieved only by shifting the AD curve
D) because real wages must fall during price increases rather than wait for money wages to fall

Question

For policymakers who favour an active approach, why are public policy changes considered necessary for curing a recessionary gap?  
A) because the short-run aggregate supply curve will otherwise shift quickly to the right 
B) because prices and wages are flexible downward but NOT upward 
C) because the required decrease in output can be achieved only by shifting the AD curve 
D) because real wages must fall during price increases rather than wait for money wages to fall

Quizplus · Accepted Answer

The Answer is D

For Policymakers Who Favour an Active Approach, Why Are Public