Asked by

Emilee Spangler
on Nov 11, 2024

verifed

Verified

Which of the following is not consistent with a self-correcting economy?

A) Falling wages that correct a recessionary gap
B) Falling prices that correct a recessionary gap
C) Rising prices that correct an expansionary gap
D) Tendency of the short-run aggregate supply to shift until it intersects aggregate demand at potential GDP
E) An active approach to a recession or depression

Self-correcting Economy

An economy that possesses mechanisms to automatically adjust itself to balance out recessions or inflations without external intervention.

Recessionary Gap

The difference between the actual output of an economy and its potential output if all resources were fully employed, indicating underperformance.

Expansionary Gap

A situation in an economy where total spending exceeds the production capacity, leading to inflationary pressures and a rise in output.

  • Understand the process by which self-regulating mechanisms adjust an economy to achieve its potential output.
  • Identify the differences between active and passive economic policy tactics.
verifed

Verified Answer

HO
Hinton OwsleyNov 13, 2024
Final Answer:
Get Full Answer