If an Economist Who Favors a Passive Approach Observes a Drop

question 103

Multiple Choice

If an economist who favors a passive approach observes a drop in real GDP caused by a decrease in aggregate demand,she is most likely to think that

• A)the economy will recover by itself before discretionary policy can correct the situation
• B)discretionary policy will correct the situation before the economy recovers by itself
• C)the imposition of policy rules will correct the situation before the economy recovers by itself
• D)aggregate supply will decrease to compensate for the decrease in aggregate demand
• E)the economy will not recover by itself

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Definitions:

Commodity Price Index

An index that measures the change over time in the price of a basket of commodities.

Productive Resources

Inputs used in the production of goods and services, such as land, labor, capital, and entrepreneurship.

Productive Resources

are inputs used in the production of goods and services, such as land, labor, and capital, that contribute to productivity and economic output.

Living Standards

The level of wealth, comfort, material goods, and necessities available to a certain socioeconomic class in a certain geographic area.