Suppose the economy is in a recession.Which of the following policies would is most likely to be supported by a person who favours an active approach to policy?
A) The economy should be left to cure itself without government intervention.
B) The Bank of Canada should sell Canadian government securities in its open-market operations.
C) The Bank of Canada should raise the overnight loans rate.
D) Government purchases should increase.

Question

Suppose the economy is in a recession.Which of the following policies would is most likely to be supported by a person who favours an active approach to policy?  
A) The economy should be left to cure itself without government intervention. 
B) The Bank of Canada should sell Canadian government securities in its open-market operations. 
C) The Bank of Canada should raise the overnight loans rate. 
D) Government purchases should increase.

Quizplus · Accepted Answer

A person who favours an active approach to policy believes that the government should intervene in the economy during a recession. Option D suggests that the government should increase purchases during the recession, which can help stimulate economic activity and create jobs. Options A and C suggest a more laissez-faire approach, which is not supported by someone who favours an active approach. Option B may be a valid policy during a period of high inflation, but it is not appropriate during a recession.

Suppose the Economy Is in a Recession