For Those Who Favor an Active Approach,public Policy Changes Are

question 104

Multiple Choice

For those who favor an active approach,public policy changes are necessary to cure a recessionary gap because:

• A)the short-run aggregate supply curve will otherwise shift quickly to the right.
• B)prices and wages are flexible downward but not upward.
• C)the required decrease in output can be achieved only by shifting the aggregate demand curve.
• D)real wages must fall in order to increase aggregate supply in the economy.
• E)falling money wages will cause the AD curve to shift leftward unless policy counters this movement.

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Definitions:

Perceived MC

Perceived Marginal Cost represents the cost perceived by a firm or individual for producing one additional unit of a good or service, factoring in not only direct cost but also subjective considerations.

Optimal Quantity

The ideal amount of a good or service that achieves the best possible outcome or utility for a consumer or company, balancing cost and benefits.

Minimum Variable Cost

The lowest point on the curve where a firm covers all its variable costs of production without considering fixed costs, often relevant in short-run output decisions.

Competitive Market

A market structure characterized by a large number of buyers and sellers, where no single entity has the power to significantly influence market prices.