The automatic adjustment mechanism that makes the economy move toward the long-run Phillips Curve is
A)expansionary fiscal or monetary policy.
B)inflation expectations and wage adjustments.
C)contractionary fiscal or monetary policy.
D)increases in productivity over time.

Question

Quizplus · Accepted Answer

Inflation expectations and wage adjustments are key components of the automatic adjustment mechanism that guides the economy back to the long-run Phillips Curve, as they influence the natural rate of unemployment and inflation.

The Automatic Adjustment Mechanism That Makes the Economy Move Toward