Which of the Following Statements Supports the Passive Approach to a Contractionary

question 151

Multiple Choice

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

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

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Definitions:

Needy Families

Refers to low-income families that require financial assistance or support services to meet basic living needs.

Welfare System

A government program designed to support individuals and families in need through financial aid and social services.

Countercyclical Payments

Financial payments made by the government to individuals or businesses during economic downturns to stimulate the economy.

Direct Payments

Cash subsidies paid to farmers based on past production levels; a permanent transfer payment unaffected by current crop prices and current production.