Which of the following is not consistent with a self-correcting economy?
A)Market forces work relatively well in pushing the economy to potential GDP.
B)Prices and wages are flexible.
C)A recessionary gap is corrected through falling wages and prices.
D)The short-run aggregate supply tends to shift until it intersects aggregate demand at potential GDP.
E)An active approach to a recession or depression.

Question

Quizplus · Accepted Answer

A self-correcting economy relies on market forces and flexibility of prices and wages to adjust to changes in demand, supply, and production. An active approach, such as government intervention, goes against the idea of a self-correcting economy and may introduce inefficiencies or distortions in the market. Therefore, choice E is not consistent with a self-correcting economy.

Which of the Following Is Not Consistent with a Self-Correcting