The GDP for the nation of Economia is currently above potential output. If the adjustment to the long-run equilibrium occurs rapidly, the government of Economia is likely to pursue a policy of
A) decreasing government spending to decrease aggregate demand.
B) decreasing the money supply to decrease aggregate demand.
C) decreasing government spending to increase aggregate demand.
D) taking no action and allowing the economy to adjust naturally.

Question

Quizplus · Accepted Answer

If the adjustment to the long-run equilibrium occurs rapidly, the government is likely to take no action and allow the economy to adjust naturally, as the economy is expected to self-correct without intervention.

The GDP for the Nation of Economia Is Currently Above