Exhibit 17-2 -According to Those Who Favor a Passive Approach to Policy

question 126

Multiple Choice

Exhibit 17-2
-According to those who favor a passive approach to policy, how will the economy shown in Exhibit 17-2 attain equilibrium at potential output?

• A)Real wages will rise causing the SRAS curve to shift left.
• B)The SRAS curve will shift to the right.
• C)Either the money supply or government spending should be increased.
• D)Either the money supply or government spending should be decreased.
• E)Aggregate demand should be decreased.

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Definitions:

Physiological Excitation

The activation of the body's arousal system, resulting in increased physical activity and energy levels, often as a response to stimuli.

Instinct

An innate, typically fixed pattern of behavior in animals in response to certain stimuli, believed to be driven by biological necessities.

Tension

A mental or emotional strain caused by the conflict between opposing forces, thoughts, or feelings.

Homeostatic Approach

A concept in psychology that refers to the process by which organisms maintain a stable internal environment despite external changes, often applied to emotional regulation.