13. An economist favoring an active approach who observes a drop in real GDP cau

Question

13. An economist favoring an active approach who observes a drop in real GDP caused by a decrease in aggregate demand 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 economy will recover by itself before policy rules correct the situation d, the imposition of policy rules will correct the situation before the economy recovers by itself Exhibit 0053 Price level Potential output SRAS AD Real GDP

Explanation / Answer

the answer is b.

An economist with active approach believes that discretionary fiscal policy of public expenditure will increase the aggregate demand. AD curve will shift to right and GDP will increase to full employment level.

Whereas automatic correction will take a long time.

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.