Suppose a Passive Approach to Policy Is Followed

question 4

Multiple Choice

Suppose a passive approach to policy is followed.How would an expansionary gap eventually close?  

• A) Restrictive fiscal policy would be used. 
• B) Restrictive monetary policy would be used. 
• C) Inflation would cure the problem because the price level in an expansionary gap is lower than firms and workers had expected. 
• D) Inflation would cure the problem because the price level in an expansionary gap is higher than firms and workers had expected.

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Definitions:

Imitation

The action of using someone or something as a model and attempting to replicate their behavior or actions.

Applying Lipstick

The act of applying a cosmetic product to the lips, typically to add color, texture, or protection.

Crayon

A stick of colored wax, charcoal, chalk, or other material used for writing, drawing, or coloring.

Symbolic Tool

A tangible or conceptual tool used to represent or stand for something else, aiding in communication, thought processes, or solving problems.