According to the "self-correcting mechanism" in the AD-AS framework,________.
A)the aggregate demand curve shifts up or down as needed to bring the economy to full employment
B)the inflation rate changes as needed to move the economy along the short-run aggregate supply curve until output is at potential output
C)the long-run aggregate supply curve shifts until it intersects both the aggregate demand and short-run aggregate supply curves at a single point
D)inflation and expected inflation are unaffected by deviations of output from potential output
E)none of the above

Question

Quizplus · Accepted Answer

The self-correcting mechanism refers to the economy's ability to return to full employment output over time without intervention, primarily through shifts in the short-run aggregate supply curve due to changes in wages and prices, not through shifts in aggregate demand or long-run aggregate supply.

According to the "Self-Correcting Mechanism" in the AD-AS Framework,________