Those who favor a passive approach to policy think that all of the following conditions will allow the economy to bring itself out of a contractionary gap except one. Which is the exception?
A)lower real wages
B)a shortage of labor
C)lower production costs
D)a lower expected price level
E)a rightward shift in the short-run aggregate supply curve

Question

Quizplus · Accepted Answer

A shortage of labor would indicate that the economy is already at or beyond full employment, which means that there is no contractionary gap to begin with. Therefore, a shortage of labor would not allow the economy to bring itself out of a contractionary gap.

Those Who Favor a Passive Approach to Policy Think That