The self-correcting mechanism is the reason that the economy will behave as the classical model predicts in the long run.

Question

Quizplus · Accepted Answer

The self-correcting mechanism, which includes factors such as flexible prices and wages and market forces, is integral to the classical model. These mechanisms naturally adjust to shocks to ensure that the economy returns to its long-run equilibrium level of potential output. Therefore, the economy is expected to behave in the long run as predicted by the classical model.

The Self-Correcting Mechanism Is the Reason That the Economy Will