In the Long Run, How Would an Active Approach to a Contractionary

question 18

Multiple Choice

In the long run, how would an active approach to a contractionary gap differ from a passive approach to policy?

• A)Both the price level and the level of real GDP would be higher in the long run with the activist solution.
• B)Both the price level and the level of real GDP would be lower in the long run with the activist solution.
• C)The price level would be higher and the level of real GDP would be lower in the long run with the activist solution.
• D)Only the price level would be lower in the long run with the activist solution.
• E)Only the price level would be higher in the long run with the activist solution.

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Definitions:

Dictator Game

An experimental game in economics that tests individuals' behavior towards altruism and fairness, where one player (the "dictator") decides how to split an endowment between themselves and another player.

Market Transactions

The processes involved in buying or selling goods and services in a market between buyers and sellers.

Ultimatum Game

A game in experimental economics in which two players decide on how to divide a sum of money; one player proposes a division, and the other can accept or reject it.

Dictator Game

An experimental game in economics where one player (the "dictator") determines how to split an endowment between themselves and another player.