Which of the Following Statements Supports the Passive Approach to Close

question 89

Multiple Choice

Which of the following statements supports the passive approach to close a recessionary gap?

• A) It is likely that policies will be subject to time lags.
• B) Prolonged unemployment may cause an economy's potential real GDP to fall.
• C) Workers' skills may grow rusty during a prolonged recession.
• D) It is likely that unemployed workers will drop out of the labor force.
• E) Firms may neglect their capital stock during a prolonged recession.

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Definitions:

Perfectly Competitive Industries

Markets where no single buyer or seller has the power to influence prices, and where products are homogeneous and information is freely available.

Easily Enter And Exit

A term used to describe a market condition where barriers to entry and exit are low, allowing for free movement of firms into and out of the industry.

Homogeneous Products

Products that are identical in quality and cannot be distinguished by consumers, making them perfect substitutes.

Marginal Revenue

The additional revenue that a firm receives from selling one more unit of a product or service.