Exhibit 17-1
-According to those who favor an active approach to policy, how can the economy shown in Exhibit 17-1 attain equilibrium at potential output?
A)The SRAS curve will shift to the left.
B)The SRAS curve will shift to the right.
C)Either the money supply or government spending should be increased.
D)Either the money supply or government spending should be decreased.
E)Aggregate demand should be decreased.

Question

Exhibit 17-1 
-According to those who favor an active approach to policy, how can the economy shown in Exhibit 17-1 attain equilibrium at potential output?
A)The SRAS curve will shift to the left. 
B)The SRAS curve will shift to the right. 
C)Either the money supply or government spending should be increased. 
D)Either the money supply or government spending should be decreased. 
E)Aggregate demand should be decreased.

Quizplus · Accepted Answer

An active approach to policy suggests using tools like increasing the money supply or government spending to boost aggregate demand, thereby moving the economy towards equilibrium at potential output.

Exhibit 17-1 -According to Those Who Favor an Active Approach to Policy