Which of the following statements supports the passive approach to a recessionary gap?
A)It is likely that policies will be subject to time lags.
B)Prolonged unemployment may cause the economy's potential real GDP to fall.
C)Workers' skills may grow rusty during a prolonged recession.
D)Unemployed workers may drop out of the labor force during a prolonged recession.
E)Firms may neglect their capital stock during a prolonged recession.

Question

Quizplus · Accepted Answer

Passive approaches to recessionary gaps often emphasize the potential drawbacks of active intervention, such as time lags in implementing policies, which can lead to mistimed or ineffective responses.

Which of the Following Statements Supports the Passive Approach to a Recessionary