Suppose an Economist Who Favours a Passive Approach Observes a Drop

question 111

Multiple Choice

Suppose an economist who favours a passive approach observes a drop in real GDP caused by a decrease in aggregate demand.What is the economist most likely to think?  

• A) that the economy will recover by itself, before discretionary policy can correct the situation 
• B) that discretionary policy will correct the situation before the economy can recover by itself 
• C) that the imposition of policy rules will correct the situation before the economy can recover by itself 
• D) that aggregate supply will decrease

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Definitions:

Annual Payments

Regular payments made once a year, often associated with loans, annuities, or insurance policies.

Carrying Amount

The book value of an asset or liability on a company’s balance sheet, considering factors like depreciation or amortization.

Quick Ratio

A liquidity metric that measures a company's ability to cover its short-term obligations with its most liquid assets excluding inventory.

Contingent Liability

A potential financial obligation that depends on a future event occurring or not occurring.