If a Passive Approach to Policy Was Followed,how Would an Expansionary

question 114

Multiple Choice

If a passive approach to policy was followed,how would an expansionary gap eventually close?

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