Those who favor an active approach to policy and those who favor a passive approach disagree not only on how quickly the government can act but also on how stable the economy basically is.
a. True
b. False
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QUESTION 2Advocates of an active approach think that only when unemployment is high, the natural adjustments of wages and prices can be effective.
a. True
b. False
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QUESTION 3The country of Erbia has been experiencing high unemployment over a period of seven years. A likely outcome of such a situation is that potential GDP will fall.
a. True
b. False
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QUESTION 4The effectiveness lag for monetary policy is short.
a. True
b. False
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QUESTION 5An economy that self-corrects an expansionary gap will experience stagflation.
a. True
b. False
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QUESTION 6Passive macroeconomic policy would rely on natural market forces and automatic stabilizers to close an expansionary gap.
a. True
b. False
Indicate whether the statement is true or false
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