The automatic mechanism ________ the price level in the case of ________ and ________ the price level in the case of ________.
A)raises; recession; lowers; expansion
B)raises; expansion; raises; recession
C)lowers; expansion; lowers; recession
D)lowers; recession; raises; expansion
E)lowers; a peak; lowers; a trough

Question

Quizplus · Accepted Answer

The automatic mechanism refers to how market forces or monetary policies react to economic conditions. In the case of a recession, the mechanism aims to lower interest rates or increase money supply to stimulate spending and investment, effectively raising the price level. Conversely, in the case of an expansion, the mechanism seeks to control inflation and overheating of the economy by raising interest rates or reducing money supply, which lowers the price level.

The Automatic Mechanism ________ the Price Level in the Case