The self-correcting property of the economy means that output gaps are eventually eliminated by:
A)rising or falling prices.
B)falling prices only.
C)increasing or decreasing potential output.
D)government policy.

Question

Quizplus · Accepted Answer

The self-correcting property of the economy refers to the idea that, over time, the economy will naturally return to its potential output level through adjustments in prices and wages. Rising or falling prices help eliminate output gaps by influencing aggregate demand and supply.

The Self-Correcting Property of the Economy Means That Output Gaps