Macro AD-AS Model
In Exhibit 14A-4, the self-correction argument is that in the long run, competition:

Question

Quizplus · Accepted Answer

The self-correction argument is that in the long run, the economy will naturally move back to its potential output level due to adjustments in prices and wages. One of the ways this happens is through competition among firms for unemployed workers, which leads to an increase in nominal wages. As nominal wages increase, the SRAS curve shifts to the right, allowing the economy to produce more without causing inflation. Therefore, choice B is the best answer.

Macro AD-AS Model in Exhibit 14A-4, the Self-Correction Argument Is That in the That