Which of the following statements is NOT consistent with a self-correcting economy?
A) Prices and wages are flexible.
B) A recessionary gap is corrected through falling wages and prices.
C) The short-run aggregate supply tends to shift until it intersects aggregate demand at potential GDP.
D) The best policy is to take an active approach to a recession or depression.

Question

Which of the following statements is NOT consistent with a self-correcting economy?  
A) Prices and wages are flexible. 
B) A recessionary gap is corrected through falling wages and prices. 
C) The short-run aggregate supply tends to shift until it intersects aggregate demand at potential GDP. 
D) The best policy is to take an active approach to a recession or depression.

Quizplus · Accepted Answer

A self-correcting economy implies that market forces will automatically correct any imbalances or problems within the economy, including a recession or depression. Therefore, an active approach to these issues would not be consistent with a self-correcting economy. Choices A, B, and C are all consistent with a self-correcting economy.

Which of the Following Statements Is NOT Consistent with a Self-Correcting