The more time a free-market economy has to adjust to price changes, the
A) greater the rate of inflation.
B) closer GDP gets to the natural rate of output.
C) closer the economy gets to the horizontal portion of the aggregate demand curve.
D) more volatility is seen in the business cycle.

Question

Quizplus · Accepted Answer

The more time a free-market economy has to adjust to price changes, the closer GDP gets to the natural rate of output. This is because as prices adjust, firms and households can make more informed decisions about production and consumption, leading to a more efficient allocation of resources and higher levels of output.

The More Time a Free-Market Economy Has to Adjust to Price