Which of the following is not consistent with a self-correcting economy?
A)Market forces work relatively well in pushing the economy to potential GDP.
B)Prices and wages are flexible.
C)A contractionary gap is corrected through falling wages and prices.
D)The short-run aggregate supply tends to shift until it intersects aggregate demand at potential GDP.
E)An active approach to a recession or depression.

Question

Quizplus · Accepted Answer

An active approach to a recession or depression would suggest intervention from the government or central bank to stimulate the economy, which goes against the idea of a self-correcting economy that is able to correct itself through market forces and flexible prices and wages.

Which of the Following Is Not Consistent with a Self-Correcting