By what mechanism does the economy always return to full employment after a demand shock in the short run?
A) Wages automatically adjust themselves.
B) The interest rate automatically adjusts itself.
C) Prices automatically adjust themselves.
D) Taxes automatically adjust themselves.
E) Rents automatically adjust themselves.

Question

Quizplus · Accepted Answer

Wages automatically adjust themselves to bring the economy back to full employment after a demand shock in the short run.

By What Mechanism Does the Economy Always Return to Full