Suppose an active approach to policy is followed.How would an expansionary gap eventually close?
A) The aggregate demand curve would shift rightward.
B) The aggregate demand curve would shift leftward.
C) The short-run aggregate supply curve would shift rightward.
D) The short-run aggregate supply curve would shift leftward.

Question

Suppose an active approach to policy is followed.How would an expansionary gap eventually close?  
A) The aggregate demand curve would shift rightward. 
B) The aggregate demand curve would shift leftward. 
C) The short-run aggregate supply curve would shift rightward. 
D) The short-run aggregate supply curve would shift leftward.

Quizplus · Accepted Answer

An active policy approach would involve reducing aggregate demand to close an expansionary gap, shifting the aggregate demand curve leftward.

Suppose an Active Approach to Policy Is Followed