The self-correcting mechanism would be expected to be very rapid in an economy with
A)a large multiplier.
B)flexible prices.
C)rigid wages.
D)high labor productivity.

Question

Quizplus · Accepted Answer

In an economy with flexible prices, changes in supply and demand would be reflected in prices quickly, leading to a self-correcting mechanism where the market reaches equilibrium again without intervention. This is because prices are able to adjust to balance supply and demand, whereas rigid wages can prevent this adjustment and high labor productivity or a large multiplier may not necessarily impact the ability of prices to adjust.

The Self-Correcting Mechanism Would Be Expected to Be Very Rapid