In a self-regulating economy,inflationary and recessionary gaps
A) never occur.
B) are eliminated by forces internal to the economy,without government intervention.
C) are eliminated by timely actions of government policymakers.
D) are the desirable results of microeconomic price adjustments.

Question

Quizplus · Accepted Answer

In a self-regulating economy, inflationary and recessionary gaps are eliminated by forces internal to the economy without government intervention. This is because the free market is believed to be able to adjust to changes in demand and supply through the price mechanism. As prices change, individuals and firms will react accordingly, either increasing or decreasing their spending and production, leading to a closure of the gap over time. Thus, government intervention may not be necessary to correct for these gaps.

In a Self-Regulating Economy,inflationary and Recessionary Gaps